In its 2013 Financial Report Tullow said it has had to stop any appraisal and development work on the Ngassa field. The statement partly reads that the Ngassa field \"has been written off due to offshore appraisal and development being currently uneconomic.â€
After making an oil discovery on the Ngassa Fields in 2009, Tullow Oil has declared that developing this discovery further doesn’t make economic sense.
The Ngassa discoveries stretch into Lake Albert in the Kaiso-Tonya Licensed Area in Buliisa District. The area from the shores of Lake Albert, according to maps, gets as far as the Uganda – Democratic Republic of Congo border on the lake.
The discovery in 2009 was announced with pomp by the oil company, heralded to have “the potential of being the largest oil field” in the Albertine region at that time.
If development and appraisal had gone on, this would have been the first time Uganda gets to produce oil offshore. Most of the oil discoveries so far are on land – onshore – or on the shores of Lake Albert. Tullow however, in its 2013 Financial Report said it has had to stop any appraisal and development work on the Ngassa field.
The statement partly reads that the Ngassa field “…has been written off due to offshore appraisal and development being currently uneconomic.”
Angus McCoss, the Exploration Director, Tullow Plc, told investment bankers in London, United Kingdom, that the company was opting for the lower cost appraisal and development of oil wells in East Africa, whereas Ngassa posed unique and expensive challenges.
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Tullow is currently producing oil in Ghana – The Jubilee Field - , which is in the Atlantic Ocean. Rendering the Ngassa field uneconomical means that Tullow has had to cut its losses – money invested during the exploration process – with the license now being returned to government. The losses taken on writing off some of the “uneconomic” discoveries had a significant dent in their profitability in 2013. Tullow’s profits slumped by 72 percent to 313 million US Dollars.
Additionally, Tullow had to cut its losses on exploration that rose by 28.9 percent to 871 million US Dollars; Ngassa is one of these losses.
There have been tensions between Uganda and the Democratic Republic Congo over the discoveries made on the Ugandan side of Lake Albert. This led to calls from Non-Governmental Organisations for the two countries to re-demarcate their borders before any oil production can start.
According to the Petroleum Exploration and Production Department (PEPD), when an oil company renders an area uneconomical, the government doesn’t compensate them for their investment. The license will now revert back to government. Ministry of Energy officials were yet to confirm whether the government now holds the license.
According to the Tullow statement, the three equal partners – Total, Tullow and CNOOC - in the licensed Albertine region are looking at some cost cutting initiatives, which they say has brought in “multi-billion dollar” cost savings for the companies.