Uganda has handed over the petroleum exploration license in the Kanywataba block in the Albertine area to an Australian company - Armour Energy Limited.
Speaking at a press conference at the Ministry of Energy offices in Kampala Thursday morning, Energy Minister Irene Muloni said the issuance of the license to Armour Energy Limited brings in a new player in Uganda's oil and gas sector.
"This is in response to our objective as a ministry of ensuring that the country's resource base which currently stands at 6.5 Billion barrels oil in place is expanded by further exploration efforts," Muloni said.
She said that the key elements of the Kanywataba block deal, done in accordance with Section 58 of the Petroleum (Exploration, Development and Production) Act, 2013, includes an exploration license with an acreage of 344 square kilometer for four years split into two periods of two years each.
The other part of the deal is 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.
The other elements include payment of royalty based on the gross total daily production in barrels of oil per day - the rate of royalty ranges from 8.5% to 21% and the cost recovery limit for petroleum has been set at 65%.
Payment of a signature bonus, research and training fees, and annual acreage rental fees for the first exploration period amounting to $316,000 have been paid to the Uganda Petroleum Fund. Performances (Bank) guarantee amounting to 50% of the minimum exploration expenditure for the first exploration period is ($990,000).
"Due diligence was carried out; it required someone who is serious and determined," Muloni said in support of handing over the license to Armour Energy Limited.
Meanwhile, Muloni said the company is required to train and employ suitably qualified Ugandan citizens in addition to payment of annual training fees to government.
Roger Cressey, the chief executive officer of Armour Energy Limited applauded government for choosing his company amongst many for this activity and promised to fulfill the terms and conditions detailed in the agreement.
At the launch of the licensing round, six blocks covering 2,674 square kilometres were offered and 19 firms initially expressed interest but four - Armour Energy Limited and three Nigerian firms emerged as winners. Armour is the first to sign an agreement with the government.