Chinese Oil Company CNOOC has announced it will not be exercising its right to preempt the sale of Tullow Oil’s entire interest in Uganda’s oil blocks to Total.
Tullow last month sold off all its interest in Blocks 1, 1A, 2 and 3A and the proposed East African Crude Oil Pipeline (EACOP) System to Total Uganda for a cash consideration of US$575 million plus potential contingent payments after first oil (the Transaction).
CNOOC, which is the third company operating in the oil region however, had rights to pre-empt and acquire up to 50% of these assets on the same terms and conditions as Total.
However, Tullow announced this morning that the Chinese company had told them and Total that it has elected not to exercise its pre-emption rights.
“Accordingly, there are no changes to the previously announced transaction or timeline and Tullow continues to expect the transaction to complete in the second half of 2020,” Tullow announced.
CNOOC’s possible intervention has been one of the few remaining hurdles for this deal to be completed.
The transaction nonetheless remains subject to a number of conditions, including approval by Tullow’s shareholders, customary government and other approvals and the execution of a binding tax agreement with the Government of Uganda and the Uganda Revenue Authority that reflects the agreed tax principles previously announced.
Tullow said to day that they will now look to progress the tax agreement following CNOOC’s decision not to pre-empt.
The sale deal has already been welcomed by Government of Uganda which is eager get to the Final Investment Decision (FID).
Energy and Mineral Development Minister Hon. Dr. Kitutu Mary Goretti Kimono recently described the farm out deal as “a significant milestone in Uganda’s Oil and Gas Sector”
“It is a critical development that takes the sector towards the Final Investment Decision (FID) that the country is eagerly waiting for,” she said.