Uganda signs oil exploration deal with Australian firm

Tullow Oil workers at a rig in Buliisa District, Bunyoro Region IN 2017. (Image credit: NMG)

The government of Uganda through the Ministry of Energy and Mineral Development has penned a Production Sharing Agreement (PSA) with an Australian firm M/S DGR Energy Turaco Uganda SMC Ltd for the petroleum exploration, development and production in the Albertine rift valley for the Turaco Contract Area.

This brings to four the number of companies licensed to prospect the basin for more oil.

Signing on behalf of Uganda, Energy and Mineral Development Minister, Dr Ruth Nankabirwa Sentamu said the signed deal entails a Petroleum Exploration Licence (PEL) with an acreage of 635 square kilometres of four exploration period split into two exploration periods of two years each.

The agreement states that payment of royalty will be based on the gross total daily production in barrels of oil per day with the rate of royalty for both PSAs ranging from 7.5 per cent to 20 per cent. The cost recovery limit for both cost oil and cost gas has been set at 65 per cent each.

The minister also signed an addendum to the Kanywataaba PSA with M/S Armour Energy Uganda (SMC) Ltd. The addendum will pave for the second renewal of the exploration licence for the Kanywataaba Contract Area which will expire on May 28, 2023.

Turaco is a 637 square kilometre exploration area located on the southern tip of Lake Albert for which the company will pay rental acreage and research and training fees among others.

DGR Energy and state-owned Uganda National Oil Corporation (UNOC) are the latest upstream entrants in the race to find more hydrocarbons with Nigerian firm Oranto Petroleum and Armour Energy – a subsidiary of DGR Global having signed deals to venture into the business in 2017.

In January, cabinet approved exploration licences for UNOC for Kasurubani – a large oil block located in three of Bunyoro region including Hoima, Buliisa and Masindi and for DGR in Turaco located in Ntoroko district.

UNOC subsequently signed a PSA with the government for the 1,285sqkm Kasurubani exploration area over which the company – a novice in upstream activity is negotiating with China National Offshore Oil Corporation (CNOOC) to explore jointly leveraging on the Chinese firm’s financial muscle.

Ms Irene Batebe, the Permanent Secretary in the Ministry of Energy and Mineral Development, says Uganda is keen to find more oil to feed the planned refinery at Kabaale village in Kabaale sub-county, Hoima district and for export.


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