The granting of Uganda’s first oil production license to China National Offshore Oil Corporation (CNOOC) in September for the Kingfisher Area (Block EA-3A) was not given the deserved attention by local media and thus went by as a low key ceremony.
Even though the block contains an estimated 15% or 45,000 barrels per day (bpd) of the estimated full capacity flow of 22,000 bpd, compared to blocks EA-1&2 operated by Total that bears an estimated 75% or 175,000 bpd, the issuing of this license is a very significant historic step in the history of Uganda’s young oil & gas industry.
Other than the fact that this license now allows CNOOC to fast track plans to unlock US$2bn for the next four years for investment into infrastructure like access roads, an airstrip, land leasing and acquisition and engineering activities among others the project will also help lessen on the anxiety that has been growing over Uganda’s real first oil. It will also help provide learning to the other two companies Total and Tullow on the mistakes they need to avoid and the best practices they need to learn from.
Armed with the production license, CNOOC is now in position to start engaging investors and financiers to provide funds for development of the infrastructure needed. These are often referred to as Final Investment Decisions. Without a production license, rarely do investors want to sink additional capital into a venture.
Building Wealth; Five Ugandan Entrepreneurs Democratizing Access to Investments.CNOOC declined to respond to our questions directly regarding the production license but instead referred us to a statement, where the company Vice President in Uganda, Jin Wiengen is quoted. It didn’t say much on the sourcing for funds, but rather emphasized the commitment of the company towards Uganda’s oil sector. CNOOC, however, has a cash treasure trove as the company has been expanding its foot print globally, so convincing investors appears to be rather easy at least from its track record.
Other partners, like Tullow on the other hand have to convince investors on their venture in Uganda if they want more capital. Tullow’s record before oil production started in Ghana in 2010 was mainly an oil exploration company. This time, Uganda will be the second country where they are involved in an oil production venture, in Africa.
“The issuance of the production license by MEMD to CNOOC (and its partners) is a key milestone for Tullow as it provides the approval for the development of the discovered reserves in Block3 and represents a further step towards the realization of the commercial value of Tullow’s (and it partners) investment in the Lake Albert Basin in Uganda,
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