http://info.afrindex.com
China-Africa Trade Information Service
Photo by:The East African
Uganda has set tougher terms for new entrants in its oil and gas sector, where profits and losses will be shared in line with prevailing oil prices.
The new terms also restrict investors from recouping more than 65 per cent of their production costs in a year.
In the latest Production Sharing Agreement (PSA) signed last week, between Uganda and Armour Energy Ltd, the government will also be approving the company's annual budget and expenditure.
The Australian Securities Exchange-listed company has been given an exploration licence for the Kanywataba block.
Nigeria's Oranto Petroleum International Ltd will also get an exploration licence and PSA for the shallow and deep plays in the Ngassa area.
The two companies met the financial, technical health, safety and environment management requirements for the licences.
Uganda does not have capital to invest in its oil and gas industry, so it enters into PSAs with companies. These firms inject money for exploration, field development plans and oil production.
However, their expenditure is recoverable at the start of actual oil production for an agreed ratio.
"We have agreed that when production begins, the companies can recover 65 per cent of its production costs every year instead of full expenditure incurred for that year and the balance will be shared as profits.
But, if expenditures are high and revenues low, then we shall have zero consumption," Permanent Secretary at the energy ministry, Robert Kassande told The EastAfrican.