As Uganda prepares to launch its third petroleum licensing round later this year, the surrender of three exploration blocks last year is prompting fresh scrutiny of the country’s reputation as one of Africa’s most successful frontier oil provinces.

 

Australia’s Armour Energy relinquished the Kanywataba block, while Nigeria’s Oranto Petroleum surrendered the Ngassa Shallow and Ngassa Deep licences after their exploration permits expired without a commercial discovery.

Armour’s affiliate, DGR Global, also saw its licence for the Turaco block lapse without seeking renewal as the company’s parent group buckled under financial strain.

The departures come at a sensitive moment for Uganda’s petroleum sector and raise a key question: Do they reflect the financial and technical limitations of the junior explorers involved, or point to deeper challenges in finding commercially recoverable hydrocarbons beyond Uganda’s established discoveries?The exits contrast with the Albertine Basin’s reputation as one of the world’s most successful frontier oil provinces.

According to the Petroleum Authority of Uganda, 106 of the 121 exploration and appraisal wells drilled between 2006 and 2013 encountered oil and gas, representing a success rate of 87 percent – far above the global industry average of roughly 10 percent. While the figure includes appraisal wells and is therefore not directly comparable with global wildcat exploration statistics, it remains exceptionally high by international standards.

Yet after nearly a decade of holding the licences, Armour and Oranto failed to drill exploratory wells that might have improved their chances of a commercial discovery.

Their exit – and that of DGR Global – raises an uncomfortable question: If one of Africa’s most successful frontier basins still contains significant undiscovered resources, why were licensed operators unable to convert geological promise into commercial discoveries?Sources familiar with the process say the Ngassa plays, regarded as highly prospective and believed to contain significant oil and gas resources, are expected to return in the third licensing round. The Turaco acreage is also expected to be offered.

For government, the episode has reinforced the importance of selecting financially and technically capable operators.“We may need to do a little more due diligence this time round with the aim of getting companies which are financially and technically strong. And more serious,” Robert Tugume, acting Commissioner for Petroleum Exploration, Development and Production at the Ministry of Energy, told The EastAfrican.

Mr Tugume argues that company size alone does not explain the outcome. He points to Heritage Oil, which made some of Uganda’s earliest commercial discoveries between 2006 and 2009 despite being a relatively small independent explorer.“The difference is that Heritage was very determined and had good, seasoned geologists,” he said. “I remember one of them was called Dr Rose, who could even sniff where oil was.”The government’s position is that the basin remains highly prospective. Officials estimate that nearly 60 percent of the Albertine Graben remains unexplored and argue that the development of the Tilenga and Kingfisher projects, together with the East African Crude Oil Pipeline (Eacop), has significantly reduced exploration risk.

The constraintsThe experiences of Armour and Oranto appear, at first glance, to support that view. The companies acquired their acreage during Uganda’s first competitive licensing round in 2015, received licences in 2017 and signed three production-sharing agreements with the government.

Over the years, both struggled to advance exploration programmes amid technical and financial challenges.

Their eventual exit cost them a combined $3.7 million in forfeited performance guarantees – $1.3 million from Armour and $2.4 million from Oranto. Performance guarantees are intended to ensure operators carry out agreed exploration work programmes and are forfeited when licence obligations are not fulfilled.

The difficulties extended beyond the two operators. A second licensing round conducted in 2019 attracted limited investor interest, with only two of five blocks awarded.

One licence went to DGR Global for the Turaco block, while the other was awarded to the Uganda National Oil Company (Unoc) for the vast Kasuruban acreage.

DGR Global’s licence eventually expired without renewal after repeated efforts to secure financing for drilling campaigns failed.

In 2023, Armour and DGR Global established Conjugate Energy in the United Kingdom with plans to list in the London bourse tto raise capital for exploration in Kanywataba and Turaco. The venture collapsed in April 2025 after repeated failures to meet statutory filing requirements, a collapse linked to broader financial problems within its Australian parent group, ending plans to drill either block.

Unoc has faced a different challenge. The state-owned company has spent much of the past year searching unsuccessfully for an experienced operator to partner with in exploring the Kasuruban block.

The licence requires the drilling of at least one exploration well, an undertaking that company officials estimate could cost $20 million to $30 million, according to the Directorate of Petroleum.

Taken together, these experiences suggest that access to capital, technical expertise and operational capacity remain significant barriers for smaller operators seeking to explore Uganda’s frontier acreage.

A changing exploration landscape?Yet industry participants argue that focusing solely on operator capability overlooks a second possibility: Uganda’s remaining frontier acreage may be inherently more difficult to explore than the basin’s early discoveries.

The Ngassa block was previously held by Tullow Oil Plc, which drilled two wells confirming the presence of both a shallow gas play and a deeper oil play. In Kanywataba, a consortium of Tullow, Total and CNOOC held the licence in 2012, with the Chinese major as operator. CNOOC later relinquished the acreage after drilling an unsuccessful well.

Some geologists argue that Uganda’s exploration profile has changed. After two decades of drilling and multiple major discoveries, the remaining prospects are likely to be smaller and more technically complex than the basin’s early targets.

Lauben Twinomujuni, an independent geologist who co-authored a recent petroleum systems study of Kanywataba and Turaco, said key uncertainties relate to hydrocarbon migration, trapping and accumulation.“The uncertainty is still higher compared to those well explored areas where enough data has been acquired and exploration has been successful. We need a couple more wells in this part of the rift,” he said.“Geologically, when an area has limited data, it remains high risk.”This assessment aligns with the type of exploration risk highlighted by industry research firm Wood Mackenzie for frontier and emerging plays: hydrocarbons may have been generated, but commercial accumulations depend on the timing and effectiveness of migration, trapping and preservation.

If so, the recent relinquishments may reflect not only company shortcomings but also the increasing complexity of Uganda’s remaining exploration targets.

Other industry observers note that relinquishment of acreage after unsuccessful exploration is common in frontier basins and emerging petroleum provinces. It does not necessarily indicate a lack of remaining resources, but rather a reassessment of geological risk and capital allocation priorities.

Geology is, however, only part of the challenge. Industry participants argue that frontier exploration in Uganda faces a combination of logistical, geopolitical and financial constraints that have become more pronounced in recent years.“On the side of government, they may need to look at different terms for onshore and offshore operators,” said Abdul Bazaara Byakagaba, former managing director of Oranto Petroleum Uganda.“In our experience, drilling offshore is complex, costly and demanding in terms of environmental protection. Then, of course, the security logistics due to DRC are another huge cost.”According to industry data, conventional onshore or deviated drilling of an exploration well on Lake Albert costs $20 million-$40 million, while a dedicated offshore drilling barge required to drill directly over the lake would cost between $40 million and $80 million.

Adding $10–20 million for seismic acquisition, technical studies and support infrastructure to a representative offshore exploration well costing about $50 million, and assuming a subsequent appraisal well of $30–50 million, a full Ngassa exploration and appraisal campaign could require investment of roughly $90–120 million.

Operators also face geopolitical considerations. Industry participants still cite the 2007 confrontation between Ugandan and Congolese forces around Rukwanzi Island on Lake Albert as a reminder of the risks associated with frontier exploration near the DRC border. Although the dispute was resolved, security concerns continue to feature in investor assessments of the wider Albertine Rift system.

The investment challenge also extends beyond East Africa. Industry veterans argue that the global energy transition has made it increasingly difficult for junior explorers to raise capital for high-risk frontier projects.

According to Mr Byakagaba, access to finance has become one of the industry’s biggest constraints.“Some of the challenges are international,” he said.“The industry is generally attracting less capital because of the global push against fossil fuels. If you have companies focused on how quickly they can get their money back, that’s going to be hard.”Licensing testThe question now facing policymakers is whether the recent exits reflect the limitations of the companies involved or reveal something more fundamental about the basin’s remaining prospects.

Uganda plans to offer both proven and frontier acreage within the Albertine Graben but has ruled out exploration in the Moroto-Kadam and Kyoga basins for now. The government intends first to acquire speculative seismic data to improve geological understanding before marketing the areas to investors.

The third licensing round may therefore serve as more than a test of investor appetite. It may also provide the clearest indication yet of whether Uganda’s recent block relinquishments reflect shortcomings among individual operators or the growing geological and commercial challenges of exploring the basin’s remaining frontier acreage.

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