The newly licensed Australian junior exploration company, Armour Energy Limited, will invest Shs7bn in its first two years in Uganda, its chief executive officer revealed on Thursday in Kampala.
Robert Cressey said that his company will invest up to $1.98m, approx. Shs7bn, during the initial exploration period, and intends to drill at least one oil well.
Mr Cressy was speaking at a news conference called to announce the issuance of an exploration licence to the company and signing of a Production Sharing Agreement with the government.
“We hope that we will find plenty of oil and further contribute to the ongoing developments on the refinery and pipeline,” he said.
Armour Energy was awarded a licence for 344 km2 Kanywantaba oil block in Ntoroko District. The company will pay royalties ranging between 8.5% and 21%, based on the gross total daily production in barrels per day.
Its exploration licence will run for four years split into two years each, during which it will undertake acquisition of seismic data.
The company also paid a signature bonus, research and training fees, annual acreage rental fees amounting to $316,000 (Shs1.1bn), and a performance bank guarantee amounting to 50% of the minimum exploration expenditure for the first two years, or $990,000 (Shs3.5bn). Irene Muloni, the energy minister, said this has already been deposited to the Petroleum Fund.
Ms Muloni further revealed that government, through the Uganda National Oil Company, will have participation in the PSA of up to 20 percent. She also revealed that the cost recovery limit for petroleum (oil and gas) has been set at 65%.
“A requirement to train and employ suitably qualified Ugandan citizens has been provided for in addition to payment of annual training fees to government,” Ms Muloni added.
Armour Energy is represented in Uganda by Mr Tom Buringuriza, who was the deputy executive director of the Uganda Investment Authority in 2008-2013.