Tullow Oil plc (Tullow) has received a green light from the government of Uganda to sell its $575 stake in the oil-rich Albertine region to French oil firm, Total.
The move is expected to pave the way to the Final Investment Decision which has eluded the country for years.
Tullow said in a statement this Wednesday that the Government of Uganda and the Ugandan Revenue Authority had executed a “binding Tax Agreement that reflects the pre-agreed principles on the tax treatment” of the sale of Tullow’s Ugandan assets to Total.
“The Ugandan Minister of Energy and Mineral Development has also approved the transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2,” said Tullow today.
“With all the Government-related conditions to closing having been satisfied, Tullow expects the transaction to close in the coming days after completing certain customary pre-closing steps with Total.”
Tullow will receive $500 million consideration and a further $75 million when a Final Investment Decision is taken on the development project.
In addition, Tullow is entitled to receive contingent payments linked to the oil price payable after production commences.
Uganda has since 2016 been lagging behind on the US$3.5billion project, owing to a number of disagreements.
In 2019, the oil project suffered a major setback after Total SA terminated activities related on the pipeline following the collapse of a deal to buy a stake in Tullow Oil Plc’s interests in the Lake Albert Development Project.
However, Chinese state oil giant CNOOC recently waived its right to pre-empt the sale of a major oil field farm-out deal in Uganda to France’s Total.
Total agreed to buy out the Ugandan assets of troubled Tullow Oil in a $575-million deal that cleared up a tax dispute with the government hanging over the country’s maiden oil project.
Under the terms of the deal, Total will acquire all of Tullow’s existing 33.33% stake in each of the Lake Albert project licenses and the proposed export-pipeline system.
The oil companies had been waiting on the farm-down deal to kick-start the $20-billion oil development which includes a $3.55-billion, crude-export pipeline and the drilling of over 500 wells to produce 230,000 b/d.
Government of Uganda and Total recently reached an agreement on the conditions of entry of the Uganda National Oil Company (UNOC) in the project as well as on the Host Government Agreement (HGA) which will govern the export pipeline project.