By Andrew Irumba
Kampala: All is not well with Irish oil company Tullow Oil, and SpyUganda has learnt that the company is considering pulling out of Uganda’s oil exploration.
This comes after the company, which also owns Tullow Operations Uganda, revealing in a statement released Wednesday, that it might consider selling all her assets in the oil exploration project to Uganda. Tullow also hinted on the slow progress towards resolving a Capital Gains tax dispute on the USD 900 million farm-down to Total and CNOOC Uganda Limited. Tullow in early 2017 announced that it was selling its stake to Total E&P at USD 900 million. While the government agreed to the sale, it asked Tullow to pay over 600 billion shillings (USD 167 million) as Capital Gains. During a meeting with President Yoweri Museveni, in January 2019, the Chief Executives of Tullow and Total agreed on principles for the tax treatment of the farm-down to CNOOC and Total. However, Tullow Chief Executive Officer Paul McDade says that “Tullow and its partners Total and CNOOC Uganda Limited have so far not been able to finalise the agreement with the Government of Uganda.” He also revealed the statement that Tullow is currently considering all options in pursuing the sale of its interests in Uganda. “We continue to work constructively with our Joint Venture Partners and the Government of Uganda to agree on a way forward and the consequent timing of Final Investment Decision (FID). Nevertheless, although negotiations continue,” McDade said.
He said the Joint Venture Partners continue to work towards reaching Final Investment Decision for the development project in the second half of 2019 with the project’s technical aspects now completed. On the East Africa pipeline (EACOP) project, McDade revealed that Geotechnical and geophysical surveys for the project have been completed for the entire route across both Uganda and Tanzania. He revealed that there are ongoing EACOP discussions between the Joint Venture Partners and the Governments of Uganda and Tanzania regarding key commercial agreements which are required prior to Final Investment Decision. SpyUganda has learnt that most of the host government agreements between Uganda and Tanzania have not been signed as Inter-Governmental agreements signed in 2017. The delay in concluding the Host Government Agreements and failure to agree on a way forward on the tax dispute could further delay first oil production earlier slated for 2020.
Some observers last week said the likelihood of a final decision on Uganda oil to come in the second half of this year is declining. The issue of delayed oil production came up at the public hearings on the King Fisher Environment Social Impact Assessment hearing in Kikube and Hoima districts. Meanwhile, the Tullow PLC boss says said they are delaying the final investment decision (FID) for its Kenya project to 2020. “The Government of Kenya continues to make good progress, both in acquiring the land for the upstream and pipeline and securing water rights for the upstream. While these activities are progressing well, they are taking longer than originally forecast. The National Environment Management Agency has requested that additional community consultation take place for the Environmental and Social Impact Assessments (ESIAs) which will now be submitted in the second half of 2019 which is later than anticipated.” Said McDade
