France’s Petroleum giant Total has 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.
In a press statement, issued in Paris today April 23, 2020 Total announced that it had bought Tullow’s entire interests in Uganda Lake Albert Development project including the East African Crude Oil Pipeline.
Total will pay Tullow an estimated USD 5,775M 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.
Oil prices have gone negative
For the first time ever, the price of U.S. crude oil has gone negative as the coronavirus pandemic obliterates demand for energy. On Monday, traders and producers paid as much as $40 for the privilege of parting with a barrel of oil.
Plummeting prices have set off a mad dash to store oil, as producers hope to weather the storm and sell their supply after the pandemic. But storage space is finite and growing ever more expensive as buyers disappear from energy markets.