ABM Chambers, House 42 | 54 Kanjokya


Investing in Oil and Gas in Uganda

Oil was discovered in 2006 in Uganda. Since this time, there has been a shift and a rising interest in the Oil and gas sector within Uganda. Not to say that oil was nonexistent before, but this was the first time we had enough oil to venture into the commercial market. According to the 1995 Constitution, the government holds ownership and control of all petroleum resources within the country and all laws that govern this are laid out in the Petroleum (Exploration, Development, and Production) Act 2013.

The government of Uganda’s goal is to ensure the sustainable utilization of petroleum resources. Policy guidance in the oil and gas sector is controlled by the Ministry of Energy and Mineral Development (MEMD). The Ministry is mandated to oversee the exploitation and development of natural and petroleum resources in Uganda; in particular, the Ministry manages private sector parties through the issuance of licenses and the negotiation of petroleum agreements. 

Credit: Independent.co.ug

The good Lord put oil and gas out there for us to find and use, and we’d better do it

Red Adair

The two regulatory institutions that regulate petroleum within Uganda are stipulated by legislation. These institutions assist the Ministry with its mandate and ensure effective management of the sector. These include;

Given the high demand for investments in the oil and gas sector, the head of the MEMD is empowered by the Upstream Law to enter into petroleum agreements with private investors. The Upstream Law gives effect to the constitution and regulates petroleum exploration, development, and production. 

We are currently working with a two-tier system licensing regime consisting of:

The license allows the licensee exclusive rights to execute petroleum operations within defined contract areas, as under an exploration license, and explore for petroleum. Where discovery is made, the licensee then applies for a production license.

Previously, any interested investors would express their interest directly to MEMD and the parties engaged in negotiations for the exploration license and the Petroleum Sharing  Agreements. Today, one acquires an exploration license through open bidding or direct applications. The Minister, upon obtaining approval from the cabinet then makes it known to stakeholders and interested parties when the bidding processes for petroleum exploration licenses will open. Interested investors then apply to the Minister in writing, expressing interest to participate in the bidding round, with the prescribed fee enclosed.

One would need to acquire the following requirements;

Any applicants must furnish security or a performance bond to execute obligations under the exploration license. Additionally, an applicant must present an insurance policy capable of covering liabilities while executing operations under this license.

Now you might have concerns as to what happens when the investors are foreign. We cannot ignore the fact that the majority of the investors in Uganda are and will be foreigners. Because of this, the government set up some regulations to govern this likelihood. According to Objective (vii) of the National Oil and Gas Policy, 2008, there should be optimum national participation in oil and gas activities. Ideally, Uganda must not be left behind. To achieve this, the following requirements are desired;