Uganda’s energy minister said on Dec. 20 she had given Tullow Oil conditional approval to farm out part of its stake in Ugandan oil fields to France’s Total and China’s CNOOC but only after taxes on the deal worth $167 million had been paid.
London-listed Tullow agreed early last year to sell Total most of its stake in Ugandan fields to Total for $900 million, but CNOOC later exercised its pre-emption rights to buy 50% of the Tullow assets on sale.
“I gave conditional consent for this transaction, subject to payment of tax obligations, as assessed by the Uganda Revenue Authority of about $167 million,” Energy Minister Irene Muloni said during a news conference.
The three firms currently each hold a 33.3% stake in the fields, and Tullow is now selling 21.5% of its stake, which will be split equally between Total and CNOCC.
Muloni said after the deal is finalized, Tullow would be a non-operator and Total would be the operator in the northern part of License Area 2, while CNOOC Uganda would be the operator of the southern part of the area.
“Given the above progress, we now expect the licensed companies to undertake the final investment decision for the upstream projects before June 2019,” she said.
Uganda discovered commercial crude oil deposits in the west of the country near the border with the Democratic Republic of Congo more than 10 years ago.
The start of commercial production has been repeatedly delayed due to a lack of requisite infrastructure such as a refinery and an export pipeline. The government said last month that it now expects oil production to start in 2021, a year later than previously expected.
In 2016 landlocked Uganda agreed with Tanzania to develop a $3.5 billion crude export pipeline to run from Ugandan fields and terminate at Tanzania’s Indian Ocean port of Tanga. The development of the pipeline project though has now been delayed with disagreements on tariffs for shipping crude through the pipeline holding up negotiations.
Muloni said the government also planned to do another licensing round for vacant blocks in 2020, but the number of blocks that would be auctioned has yet to be determined.
Muloni said Uganda’s gross crude reserves had also been revised downwards after new reservoir analyses, to 6 billion barrels (Bbbl) from 6.5 billion previously. Recoverable reserves remained at 1.4 Bbbl.
Ugandan fields also held 500 billion cubic feet of natural gas, she said.
The oil firms are expected to spend between $15 billion and $20 billion to develop Ugandan fields and the associated infrastructure and the East African country is banking on that investment and potential proceeds from crude exports of about 200,000 barrels per day to drive growth.
Drillers cut nine oil rigs in the week to March 22, bringing the total count down to 824, the lowest since April 2018, Baker Hughes, a GE company (NYSE: BHGE), said in its weekly report.
The independent U.S. energy producer aims to take a final investment decision on the $20 billion project in the coming months, having signed up long-term buyers for its LNG.
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