Uganda's Ministry of Energy earns $2 Million from latest oil block licenses

The Uganda National Oil Company (UNOC) and DGR Energy Turaco Uganda SMC have paid $2 million to the Ministry of Energy for exploration areas through annual leasing costs, research expenses, and exploration fees.
The fees paid by the businesses annually contribute to the Petroleum Fund, controlled by the Ministry of Finance, which holds government revenues derived from petroleum activities.
The second licensing cycle aims to attract more investment into Uganda's oil and gas sector, with a focus on expanding the country's resource base and increasing recoverable barrels of oil.

The second wave of new oil block licenses granted to the Uganda National Oil Company (UNOC) and DGR Energy Turaco Uganda SMC brought in $2 million (Shs7.5 billion) for the Ugandan Ministry of Energy.

The two businesses are expected to pay annual acreage leasing costs for the exploration areas, annual research and training expenses, and exploration area exploration fees.

The fees, which range from $10,000 (Shs37.2m) to $200,000 (Shs745m), are paid yearly to the Petroleum Fund, which is under the control of the Ministry of Finance and serves as a depository for all government revenues derived from petroleum-related activities. The Petroleum Fund has accounts with the Bank of Uganda and the Federal Reserve Bank of New York in the US.

While DGR Global will explore the Turaco oil block, a stretch of 635 kilometers, and the Kanywataba Exploration Area at the southern tip of Lake Albert in Ntoroko District, UNOC will be exploring the Kasurubani Contract Area, a stretch of more than 1,285 kilometers spanning the districts of Masindi, Hoima, and Buliisa.

At the signing of production sharing agreements between the government and DGR Energy, which also got an exploration license for the Turaco Contract Area, Energy Minister Ruth Nankabirwa announced the revenues.

A drilling rig is being sought for Armour Energy's exploratory efforts, according to Mr. Pru Fogarty, executive general manager of DGR Energy's subsidiary.

Irene Batebe, the permanent secretary for the Energy Ministry, stated that the second licensing cycle aims to draw more investment into the oil and gas industry.

“We want to expand the country’s resource base, which stands currently at 6.5 billion barrels, with 1.4 billion barrels recoverable,” she said.

A petroleum exploration license with an acreage of 635 kilometers and a four-year exploration period split into two exploration periods of two years each is one of the key components of the production-sharing agreement between the government and DGR Energy. Another is a minimum work schedule that includes geological, geochemical, and geophysical studies as well as one firm well and existing 2D and 3D seismic data reprocessing.

Along with other provisions, it also includes an advisory committee made up of government and licensee representatives, payment of royalties based on the gross daily production in barrels, a cost recovery limit of 65 percent for both gas and oil and production sharing based on the recovery-factor, which is dependent on the project's profitability.