The government has signed a Production-Sharing Agreement (PSA) with Uganda National Oil Company for the Kasuruban block in Albertine Graben’s Buliisa district.
The signing of the PSA with the government-owned oil company that took place on Thursday has been described as yet another milestone in the country’s oil and gas sector.
It comes after almost three years after the government announced the second licensing round for which blocks based in the districts of Amuru, Obongi Adjumani, Ntoroko, Hoima and Masind.
Uganda National Oil Company (UNOC) together with DGR Global Limited were successful and have therefore been in negotiation with the government for the award of an exploration license.
Energy Ministry Permanent Secretary, Irene Batebe told journalists that with the signing of the Production Sharing Agreement, UNOC has been awarded a two-year exploration license for the Kasuruban area.
According to Batebe, the renewal of UNOC’s license will be subject to its acquisition of a Joint Venture Partner(s) to carry out its financing obligation. The Petroleum (Exploration, Development, and Production) Act of 2013 requires UNOC to handle the government’s commercial interests in the petroleum sector.
Speaking at the signing of the agreement and the award of the license, Energy and Mineral’s Minister, Ruth Nankabirwa said UNOC is expected among other things to pay royalties based on gross total oil production in barrels per day ranging between 5.5% to 18%.
Nankabirwa revealed that as part of the agreement, UNOC had cleared over 368 million shillings ($100,000) and over 94 million shillings ($25700) being payment for signature bonus and Annual Acreage rental fee.
According to Nankabirwa, UNOC is also required to pay over 110 million shillings or $30000 annually for research and training fees for the contract area to the petroleum fund.
In total UNOC has paid over 578 million shillings or $155700 as required by the laws and the signed Production Sharing Agreement.
This is the first time the government is providing some of the details of the payments is receiving and the content of the production sharing agreement (PSA). Previous agreements had been kept secret at the time when Heritage and Tullow Oil were engaged in oil exploration in the country. Uganda being a member of the Extractive Industries Transparency Initiative (EITI) is required to declare such payments.
Nankabirwa revealed that the PSA signed with UNOC is based on the R-Factor, which depends on the profitability of the project and the Cost Recovery limit for both Cost Oil and Cost Gas is set at 65% each.
The PSA also stipulates the minimum work program which includes – reprocessing of existing seismic data, acquisition of new seismic data, interpretation of seismic and well data, drilling of at least two exploration wells.
The Petroleum Authority of Uganda’s Executive Director, Earnest Rubondo was represented by Colvice Bright Irumba, the Director of Exploration. He congratulated the Uganda National Oil Company (UNOC) upon achieving what he described as a critical milestone.
Irumba observed that the signing of the agreements puts UNOC on the path to becoming one of Africa’s giant National Oil Companies. “This is a great achievement for Uganda as a country and is indeed a testament to the growth of UNOC,” said Irumba
He said the new venture will increase the experience of Ugandans, and UNOC in oil exploration, increase National Participation at the most strategic level, and potentially increase Uganda’s resource base which currently stands at 6.5bn barrels of oil in place with 1.4 billion barrels recoverable.
UNOC’s Chief Executive officer, Proscovia Nabbanja said her company will comply with the terms and conditions for the award of the Petroleum Exploration License and fulfill the obligations of the Kasurubani Contract Area PSA.
“UNOC further commits and guarantees Government of Uganda that it will find suitable Joint Venture Partners within the First Exploration Period to work with in delivering the technical and financial obligations of the contract area,” said Nabbanja.
In addition, she said; “UNOC’s commercial participating interest in the PSA will enhance the state’s direct statutory participating interest in the project and enhance the overall commercial benefits from the Kasuruban Contract Area.”
The Petroleum Exploration License awarded to UNOC is in accordance with Section 58 of the Petroleum (Exploration, Development and Production) Act, 2013.