KAMPALA, Uganda -(Dow Jones)- Uganda has withdrawn tax breaks for companies carrying out oil exploration due to the recent discovery of commercial oil reserves, Finance Minister Ezra Suruma said Thursday.

Suruma said in a budget report that with the discovery of oil, companies can now start paying customs taxes on their imports and other supplies because they are sure of recovering the costs with the confirmation of commercial oil reserves.

"Government has been paying taxes for companies licensed to undertake petroleum exploration, development and production activities. This was government contribution during the early phase of the exploration and an acknowledgment of the risk involved as there was no certainty of oil discovery. With the recent discoveries the companies can bear the total cost of their imports and other supplies because they are sure of recovery" he said, adding that government expects to collect 8 billion Ugandan shillings ($5.07 million) in the coming financial year (July-June) from this measure.

Some of the companies operating in Uganda's oil sector include Dublin-listed (TUWLY), Canada-based Heritage Oil Corp (Toronto:HOC) (HOC.T) and London listed Tower Resources (LSE:TRP) (TRP.LN).

Commercial oil reserves were confirmed on the Ugandan side of Lake Albert in 2006 and the country is preparing to start oil production next year.

-By Nicholas Bariyo, contributing to Dow Jones Newswires; 256 752 624 615; bariyonic@yahoo.co.uk

    (END) Dow Jones Newswires   06-12-08 1053   Copyright (c) 2008 Dow Jones & Company, Inc.