In what looks like a snippet of what is contained in the highly guarded Production Sharing Agreement (PSA) signed between Uganda and Australian oil and gas exploration firm Armour Energy Limited (AEL), the government has lined out economically stringent conditions under which the explorers will operate.
The Ministry of Energy and Mineral Development Thursday granted a License for Petroleum Exploration, Development and Production over the Kanywataba Contract Area found in Ntoroko district, western Uganda, culminating into the signing of the PSA, the first in line with Section 58 of the Petroleum Exploration, Development and Production Act 2013.
Armour Energy will join UK based Tullow Oil, France’s Total E&P and Chinese CNOOC in trying to produce Uganda’s oil estimated to be 6.5 billion barrels buried in the Albertine Graben in Western Uganda. However it will have to deal with the following terms and conditions as outlined by Irene Muloni, the energy and mineral development minister.
- Armour Energy gets an exploration license with acreage of 344 sq. Kilometer for four years split into two periods of two years each.
- A minimum work programme which includes acquisition of seismic data and drilling of at least one well.
- An Advisory Committee chaired by the Petroleum Authority of Uganda, and consisting of representatives from Government and the Licensee to review and approve all annual exploration work programmes, budgets and production forecasts.
- Payment of Royalty based on the Gross Total Daily Production in Barrels of Oil Per Day (BOPD). The rate of royalty ranges from 8.5% to 21%.
- State Participation by Government or its Nominee at not more than 20%. 6. Cost Recovery limit for Petroleum is set at 65%.
- Production Sharing.
- A Signature Bonus together with Research and Training fees, and Annual Acreage Rental fees for the First Exploration Period amounting to US$ 316,000 have been paid to the Uganda Petroleum Fund.
- A Performance (Bank) Guarantee amounting to 50% of the Minimum Exploration Expenditure for the First Exploration Period.
- Taxes will be paid in accordance with the Laws of Uganda.
- A requirement to train and employ suitably qualified Ugandan citizens has been provided for in addition to payment of annual training fees to Government.
The signing of the PSA for the Kanywataba Block between the government of Uganda and Armour Energy Limited marks the successful conclusion of Uganda’s first competitive licensing round for the oil and gas sector, the minister said at the signing ceremony in Kampala.
Government in February of 2015 implemented the first competitive licensing round as required by the Petroleum (Exploration, Development and Production) Act, 2013 to attract additional investment in the country’s oil and gas sector, expand the country’s resource base which stands currently at 6.5 Billion barrels oil in place and thus increase the revenue base and enhance the country’s sustainability of oil and gas production.
After Armour Energy, the minister said more companies are going to be announced in the near future after cabinet on Friday 8th September 2017, approved the award of two licenses in the Ngassa block.