Uganda’s “oil rush” has attracted an estimated $3 billion in exploration investments since 2006, with companies channelling funds towards prospecting for more recoverable oil deposits as the country seeks to prolong the life span of its commercially viable deposits, currently estimated to last from 20-40 years.
The amount is subject to audit queries, but is estimated to have brought in $120 million in revenue from withholding taxes and stamp duty according to Uganda Revenue Authority (URA).
In addition, URA collects taxes when companies sell off their interests, the latest being $472 million expected from the sale of part of Tullow’s acreage to Total and CNOOC.
Three companies: Tullow Oil, Dominion Petroleum and Tower Resources (formerly Neptune) are the main stakeholders in oil exploration in Uganda. Already, 20 seismic surveys have been carried out and 64 shallow wells have been drilled. Uganda’s drills are on average 1.5 kilometre deep compared with most drills that go beyond three kilometres.
Exploration efforts have resulted in major oil and gas discoveries estimated at 2.5 billion barrels in place with one billion barrels recoverable from the over $3 billion petroleum exploration investments.
Tullow said it has officially injected $1 billion in exploration activities in the Uganda project. However, it’s investment ballooned when it bought Heritage assets at $1.45 billion in 2010, beating Italian oil company ENI to the deal.
The deal would result in $405 million in capital gains tax, but this has since become a subject of a long dispute between the government and Heritage in a London arbitration court.
Last week, the sector got yet another major boost with new entrants Total and China’s CNOOC signing a $2.9 billion farm down deal for 66.66 per cent of Tullow’s previously wholly owned exploration and production areas. Hence, Total takes one-third, Tullow another third while CNOOC will operate the remaining third of the block.
The farm-down follows the recent signing by Tullow of two Production Sharing Agreements (PSAs), one for the Kanywataba exploration area and a field in the Pakwach basin and the other Production Agreement for Kingfisher field with the Ugandan government.
The new partnership should bring in an estimated $10 billion in investments for the midstream and downstream development, while at the same time carrying out exploration activities in the new fields — Kanywataba and Pakwach basin.
“We expect to see activities on the ground after the farm-down and we expect production programmes to start,” said junior Energy Minister Simon D’Ujanga.
That transaction is expected to yield $472 million in capital gains tax if the current dispute that Tullow has lodged at the Tax Appeal Tribunal over the figures goes in favour of URA.
Dominion, a Bermuda registered company with operations in Uganda, Tanzania and Democratic Republic of Congo, and Tower Resources — formerly Neptune — are the other companies that have invested in exploration activities in the country.