MUSEVENI FLIES TO TANZANIA TO SIGN IMPLEMENTATION AGREEMENT FOR UGANDA’S OIL PIPELINE

President Yoweri Museveni  flew out of the country for the first time since the outbreak of the global-novel-Covid-19 pandemic to meet his Tanzanian counterpart John Pombe Magufuli and  sign an implementation agreement for the East African Crude Oil Pipeline.

Museveni is visit in Tanzania follows  the signing of the Host Government Agreement (HGA) for the East Africa Crude Oil Pipeline (EACOP) project between the government of Uganda  and Total.

Museveni said that although oil was a small fraction of the country’s mineral resources , it will be a good  spark for transformation. “It will bring money which we shall use to develop infrastructure, science and technology. This money will not be used for consumption. We shall use it to enhance our durable capacity.

Total CEO and Chairman, Patrick Pouyanne signed on behalf of his company while Energy Minister Goretti Kituntu signed on behalf of the government of Uganda .

HGA is an agreement between a foreign investor and a host government governing the rights and obligations of the foreign investor and the host government with respect to the development, construction, and operation of a project by the foreign investor. 

The pact has a stabilization clause designed to minimize the financial and political risks posed to foreign investors as a result of sudden changes in national law. An HGA is often required by foreign investors in countries where foreign investors’ rights are not otherwise protected by a bilateral investment treaty, experts say.

Early this year ,France’s Petroleum giant Total acquired Tullow’s entire interests in a major deal that could kick-start  Uganda’s oil dream journey in the lake  Albert multi-million project which had stalled for years.

Total announced that it had bought Tullow’s entire interests in Uganda Lake Albert Development project including the East African Crude Oil Pipeline.

Total  paidTullow an estimated  USD 575M with an initial payment of USD 500M at closing and USD 75M when the partners take the Final Investment Decision (FID) to launch the project which is dear to Yoweri  Museveni  Uganda’s longest-serving president.

In addition, conditional payments will be made to Tullow linked to production and oil price, which will be triggered when Brent prices are above USD62 a barrel. The statement indicated that the terms of the latest transaction have been discussed with the relevant government of Uganda and Uganda Revenue Authority (URA)officials and an agreement in principle have been reached on the tax treatment of the transaction.

Under the terms of the new deal, Total will acquire  all of Tullow’s existing  33.3% stake in each of the Lake Albert project licences, EAI ,EAIA, EA2 and EA3A plus the proposed  East African Crude Oil Pipeline  (EACOP) system. The transaction , however, is subject to  the approval of Tullow’s  shareholders, to customary regulatory and government approvals and to  CNOOC’s right to exercise pre-emption on 50% of the deal.

Total’s  Chairman and Chief Executive Officer , (CEO) Mr. Patrick Pouyanne said that the acquisition will enable the company together with its partners to move the project forward thus driving the costs down in order to deliver a robust long-term project.

Uganda’s oil production has previously be bogged down by disputes over the tax revenues accruing to the Uganda government leading to legal battles in the High Courts of Uganda and the United Kingdom. Industry experts say that Uganda is likely to get far much less revenue in taxes on the current deal and the plummeting oil prices due to the Covid-19 pandemic cannot help matters either.

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