Friday, February 3, 2012

Uganda signs Production Sharing Agreements with Tullow Uganda Limited

Press Release :

The Government of Uganda has concluded negotiations with Tullow Uganda Limited for Petroleum Exploration licences over Exploration Area 1and Kanywataba Prospect and issued a Production Licence over the Kingfisher Field on February 3rd 2012 at Amber House, Kampala.

The two Exploration Licences in the PSAs and the Production Licence have been issued under Sections 9 and 22 respectively of the Petroleum (Exploration & Production) Act, Chapter 150 of the Laws of Uganda, 2000.

Government and Tullow Uganda Limited entered into a Memorandum of Understanding (MOU) regarding the development of the petroleum resources discovered in Exploration Areas 1, 2 and 3A. The parties to the MOU, recognizing the time lost during the tax dispute over the sale of Heritage’s interests in Uganda to Tullow Uganda Limited, agreed to grant new licences over the Kanywataba Prospect Area and Exploration Area 1, for Six months and One year respectively.

It was agreed that Tullow could apply for the Kingfisher Field in accordance with Section 20(3) of the Act. Tullow duly applied for a production licence over the Kingfisher Field which has been granted today.

The PSAs for Kanywataba Prospect and EA1 have the following provisions among others:

a) Minimum Work Programme together with the Minimum Exploration Expenditure.
b) An Advisory Committee consisting of representatives from Government and the Licensee to review and approve all annual exploration work programmes, budgets and production forecasts.
c) An Initial Royalty based on progressive incremental production and an additional Royalty as a percentage of the value of the recovered reserves.
d) State Participation by Government or its Nominee at Production Level.
e) Cost Recovery limits for Oil Production and Gas Production set at different levels.
f) Production Sharing based on incremental production after deduction of Initial Royalty and the Cost Recovery
g) A Signature Bonus of US$ 200,000 and US$ 300,000 respectively upon signing of the PSA to Government.
h) Each of these two PSAs in addition have provisions for a discovery bonus of United States dollars two million (US$2,000,000).
i) All taxes will be paid in accordance with to the Laws of Uganda. The rate of income Tax presently stands at 30%.
j) A requirement to train and employ suitably qualified Ugandan citizens in addition to payment of annual training fees to Government.
k) Payment of annual surface rentals computed differently for exploration and production phases per square kilometre.

One of the key aspects that delayed the signing of these PSAs was the issue of Stabilisation and the proposal by Oil Companies to Export the Crude Oil. Government’s proposal to revise the standard Stabilisation Clause was accepted by Tullow and has been adopted in the PSAs signed today. In addition, they have agreed to Government’s policy of establishing a refinery in the country and consideration for export of crude will be made as more reserves are discovered in the country.

The Albertine Graben, the area with the potential for petroleum production in the Western rift valley of the country is now subdivided into eleven Exploration Areas (EAs). Out of these, EA1, EA2, EA4B, EA5 are licensed to Tullow Uganda Limited, Tullow Uganda Operations Pty Ltd., Dominion Uganda Limited and Neptune Petroleum Uganda Limited, respectively.

The EA1 licence area lies in the Pakwach Basin, and covers a total area of 3,058 square kilometres. The area covers parts of the districts of Nebbi, Nwoya, Kiryandongo, Masindi and Buliisa. The Kanywataba prospect area and the Kingfisher Production Area formed part of the original EA3A prior to relinquishment by Heritage. Kanywataba prospect covers a total area of 171 square kilometres and lies in Ntoroko District, while Kingfisher Production area measures 344 square kilometres and lies in Hoima and Kibaale Districts.

The Permanent Secretary
Ministry of Energy and Mineral Development
Email; Web; www.energyand / Tel. 0414-344414

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