Government has finally allowed Tullow Oil to sell all its stake in Uganda’s oil and gas sector to French oil giant, Total E&P.
Tullow in a statement on Wednesday announced that the ministry of Energy and Mineral Development and Uganda Revenue Authority approved the deal valued at $575 million (about Shs 2.231 trillion)
The three parties according to Tullow, executed a binding Tax Agreement that reflects the pre-agreed principles on the tax treatment of the sale of Tullow’s stake in the Albertine graben to Total.
The minister of Energy and Mineral Development, Mary Gorreti Kitutu also approved the transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2 based in the Lake Albert region.
In addition, Tullow is entitled to receive contingent payments linked to the oil price payable after production commences.
Energy ministry permanent secretary, Robert Kasande confirmed the approval but was hesitant to disclose how much tax Tullow is supposed to pay before exiting Uganda’s oil and gas sector. The farm-out approval comes after close to three-year standoff between the government and the oil companies.
Tullow had originally struck a deal with Total for a farm-down of licences at $900 million. But the deal collapsed after the government insisted that Tullow pay $167 million before it could transfer its assets to Total and CNOOC.
CNOOC, one of the operators in the Lake Albert Development Project had exercised preemptive rights seeking to acquire part of the shares that were on farm-down. It later withdrew its interest following a long taxation dispute.
Tullow Oil Plc the parent company of Tullow Oil Uganda at the end of August last year, terminated the planned farm-down opting to the sale of its stake or farm out. If the deal is completed, Total will have additional 33.33 per cent stake in the Lake Albert project.
The Lake Albert Development Project is a major development which expects to achieve around 230,000 barrels of oil per day when it reaches the plateau. The development plans were approved by the government in August 2016 to develop the first 1.2 billion barrels of oil.
October 22, 2020