Government has finally offered Australia's Armour Energy Limited a petroleum exploration license after almost two years of protracted negotiations.
Energy and Mineral Development Minister, Irene Muloni signed the Production Sharing Agreement on behalf of the Ugandan government while Armour Energy Limited (AEL) was represented by its Chief Executive Officer, Roger Creseey.
The signing of the agreements and award of the Petroleum exploration license for the Kanywataba block in Ntoroko was witnessed by the Acting Energy Ministry Permanent Secretary, Robert Kasande and Tom Buringuriza, the Local representative for Armour Group.
Muloni described the signing of the agreement with Armour Engineering as another historic moment for Uganda's oil and gas sector.
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According to the License, Armour Engineering Limited will carry out oil exploration with in acreage of 344 square miles in Ntoroko district for four years split in two periods of two years each.
Muloni disclosed that Armour has already paid Shillings 3.5billion ($990, 000) performance guarantee, which is 50 percent of the required seven billion Shillings. The Australian Firm is also required to pay a Royalty ranging from 8.5% to 21%.
The Royalty is based on the Gross Total daily production in barrels of oil per day. The government has according to the Minister also received over 1.1 billion Shillings or $316,000 paid to Uganda Petroleum Fund.
Roger Creseey said his company is expected to commence work soon because it has some amount of money set aside for the work. He says the company may not be very visible in the first year of work but will have at least one well drilled as per agreement with government.
He said the company is convinced that Uganda's oil can still be profitable even with the prevailing circumstances in the crude oil market.
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Government opened the first competitive licensing in 2015 as required by the Petroleum (Exploration, Development and Production Act 2013.
The licensing according to Acting Permanent Secretary, Robert Kasande was aimed at attracting additional investment in the country's oil and gas sector as well as expand the oil resources base, which currently stands at 6.5 billion barrels of oil in place
The government, according to Kasande was able to collect Shillings 8.5 billion ($2.4 million) from the sale of data to the 17 bidders that participated in the last round of competitive bidding exercise.
Meanwhile, Muloni says on Friday Cabinet accepted to grant to exploration agreements in the Ngasa Block to Oranto Petroleum of Nigeria. The decision to grant two licenses to Oranto brings to three the number of exploration licenses issued from the last round of competitive bidding.
Government has previously indicated it would grant six licenses from the last round of bidding from the time when the moratorium on licensing was lifted. The four bidders selected for negotiations included, Watersmith Petroleum Limited, Armour Energy Limited Oranto Petroleum and Niger Delta Petroleum Resources Limited.
According to Muloni, government had to carry out due diligence to ensure that only serious bidders are granted the exploration licenses. Muloni explains that the balance of the blocks will revert to the next round of competitive bidding. It is emerging that the fall in international oil prices in 2015 that led to low interest in oil exploration affected Uganda too.