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CNOOC elects not to pre-empt Tullow sale of Ugandan assets

A drilling site, Lake Albert

 

Kampala, Uganda | RONALD MUSOKE | Chinese oil firm, CNOOC, has chosen not to pre-empt Tullow Oil’s sale of its assets in Uganda to Total according to a statement published on May 28 on Tullow’s website.

“Tullow Oil plc announces that CNOOC Uganda Limited (CNOOC) has informed both Tullow and Total that it will not pre-empt the sale of Tullow’s assets in Uganda to Total,” noted the statement.

On April 23, Tullow announced that it had agreed to sell its assets in Uganda to Total. Total said it would pay Tullow US $575 million (Approx. Shs 2 trillion), with an initial payment of US $500 million (Approx. Shs 1.875 trillion) at closing (of the deal) while US $75 million (Approx. Shs 281bn) would be paid when the partners finally take the final investment decision to launch the project.

Under the terms of the deal, Total would acquire all of Tullow’s existing 33.3334% stake in each of the Lake Albert project licenses EA1, EA1A, EA2 and EA3A and the proposed East African Crude Oil Pipeline (EACOP) System.

The transaction was, however, subject to a number of conditions, including approval by Tullow’s shareholders, customary government approval, 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 as well as CNOOC’s right to exercise pre-emption on 50% of the transaction.

Following CNOOC’s move, Tullow said there are no changes to the previously announced transaction or timeline and Tullow continues to expect the transaction to be completed in the second half of 2020.

Last month, the Ugandan government welcomed the agreement reached between Total and Tullow.  Dr. Mary Goretti Kitutu, the Minister of Energy and Mineral Development  said: “The agreement is a significant milestone in Uganda’s oil and gas sector and is a critical development that takes the sector towards the final investment decision (FID) that the country is eagerly waiting for.”

Robert Kasande the Permanent Secretary of the Ministry of Energy and Mineral Development said the government and the oil companies had in principle agreed on the tax treatment of the transaction.

Tullow said it is now looking forward to progressing the tax agreement following CNOOC’s decision not to pre-empt.

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