Tullow Oil has scrapped previously announced deals to sell its 33.33% operated stake in the Lake Albert Development Project in Uganda to Total and CNOOC owing to a tax dispute with the Ugandan government.
In January 2017, the UK-based company signed a sale and purchase agreement (SPA) with Total under which it agreed to transfer 21.57% of its stake in the Ugandan oil project to Total for $900m (£739.08m).
Following the signing of the deal, CNOOC’s Uganda subsidiary exercised its pre-emption rights under the joint operating agreements to buy 50% of the interests being transferred to Total as per the same terms and conditions.
Tullow Oil CEO Paul McDade said: “Tullow has worked tirelessly over the last two and a half years to complete this farm down which was structured to re-invest the proceeds in Uganda. Whilst this is a very attractive low-cost development project, we remain committed to reducing our operated equity stake.”
The transactions, if closed would have meant that Total and CNOOC would have each raised their interest to 44.1% in the Lake Albert Development Project, while Tullow Oil would have brought down its stake to 11.8%.
The SPAs signed by the parties have expired with Tullow Oil this time around failing to secure a further extension with its joint-venture partners.
The company said that the termination of the farm-down is a result of not reaching an agreement on all aspects of the tax treatment of the transaction with the Ugandan government, which was a condition for its closing.
Details of the Lake Albert Development Project
The onshore Lake Albert Development Project covers the Exploration Areas 1, 1A, 2 and 3A located in the Lake Albert Rift Basin. It is estimated to have more than 1.5 billion barrels of discovered recoverable resources.
The onshore oil project is expected to yield nearly 230,000 barrels of oil per day (bopd) at plateau.
FID on the Lake Albert Development Project to be delayed
A final investment decision (FID) on the Lake Albert Development Project, which is due to be made by the year end, will now face further delay.
Total exploration and production president Arnaud Breuillac said: “Despite the termination of this agreement, Total together with its partners CNOOC and Tullow will continue to focus all its efforts on progressing the development of the Lake Albert oil resources.
“The project is technically mature and we are committed to continuing to work with the Government of Uganda to address the key outstanding issues required to reach an investment decision.”
