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Uganda inks first oil exploration deal under PEDPD Act

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Uganda’s appetite to discover more oil is not over yet as it has signed another oil exploration deal with Australian firm- Armour Energy Limited (AJQ.AX), the first under a competitive licensing round launched more than two years ago.

The production-sharing agreement signed in Kampala on Thursday covers Kanywataba block, a 344-square-kilometre (133-square-mile) area in the Albertine rift basin in Ntoroko district near the border with DR- Congo.

Energy Minister Eng. Irene Muloni said low oil prices meant “protracted negotiations” with firms that participated in the licensing round. Six blocks covering 2,674 square kilometers were offered and 19 firms initially expressed interest.

Four firms – Armour and three Nigerian companies – emerged as winners, but now Armour is the first to sign an agreement with the government of Uganda. Uganda received seven bids for the first licencing round in March 2016.

Muloni said the cabinet had already approved deals with one of the Nigerian firms, Oranto Petroleum International, and the government expected to sign deals with the company in three weeks’ time.

“The exploration and development of oil in Uganda is a very exciting opportunity for us,” Armour’s Chief Executive Roger Cressey told journalists in Kampala.

Uganda discovered petroleum in the Albertine basin in 2006 but its development has been sluggish due to financial considerations. Oil reserves are estimated at 6.5 billion barrels but recoverable oil is estimated at between 1.4 billion-1.7 billion barrels.

Crude production in the country has also been repeatedly delayed by tax disagreements and disagreements over development strategy but authorities have set the year 2020 for the first oil.

Armour’s exploration license is valid for four years. The licnce is the first one under Petroleum Exploration Development and Production Department (PEDPD) Act, 2013.

Kanywataba was previously licensed to existing operators, Frances’ Total (TOTF.PA), China’s CNOOC (0883.HK), and Britain’s Tullow (TLW.L) but the firms later handed it back to government as it was sent seen viable for business.

Nigerian firms selected alongside Amour though have not signed deals with Uganda are; WalterSmith Petroleum Oil Ltd., Oranto Petroleum International Ltd., Niger Delta Petroleum Resources Ltd.

Canadian firm Rift Energy Corporation, Swala Energy Ltd. (Australia) and Glint Energy LLC of USA also bid but were unsuccessful.

The evaluation of successful bids met conditions such as proposed work program, technical and financial capability, national content, health safety and environment proposed, royalty and signature bonus.

Blocks under offer included Ngassa (410 sq. kms) in Hoima district, Taitai and Karuka (565 sq. kms) in Bullisa districts, Ngaji (195 sq.kms in Rukungiri and Kanungu districts and Mvule (344 sq.kms in Moyo and Yumbe districts. There is also Turaco (425 sq.kms in Ntoroko district.

 

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