Total promises to fast track Uganda oil project

The EACOP, a US$ 3.5bn project is one of the major oil and gas infrastructure projects Uganda and its partners including; Total E&P Uganda Ltd, CNOOC Uganda Ltd, the Uganda National Oil Company and the Tanzania Petroleum Development Corporation (TPDC) are looking at building before commercialization of the country’s 1.4bn-1.7bn barrels of oil.

The pipeline will be the longest heated crude oil conduit in the world, at 1,445km, running from Kabaale in the mid-western Ugandan district of Hoima to Tanga port on the Tanzanian coast of the Indian Ocean. In Uganda, the pipeline covers 296km and cuts through 10 districts, 22 sub-counties, four small towns, 41 parishes and over 170 villages.

It traverses southward along the western side of Lake Victoria, crosses the border into Tanzania and continues to the southern end of the lake and then turns east running across the western arm of the East African Rift Valley. It terminates in the northern area of Tanga port on the Indian Ocean Coast.

The pipeline is supposed to be fed by the oil processing facilities (Tilenga and Kingfisher projects) near Lake Albert. The Tilenga project is being developed by Total while Kingfisher is expected to be run by CNOOC.  Both facilities are estimated to cost about US$ 8bn and will process about 190,000 barrels and 40,000 barrels of oil respectively once production starts.

“I congratulate Total upon concluding this agreement which moves us closer to production of crude oil in Uganda.  It has taken long but I want to assure Ugandans that this was deliberate,” Museveni said, “We have been slow but steady and sure.”

“It was a bumpy road but I am glad we have overcome the challenges. I thank the teams from both sides that have worked tirelessly,” Pouyanne said shortly after the signing ceremony at State House, Entebbe.

The signing ceremony followed several trips for Pouyanne to Uganda where he held a series of meetings with Museveni. These meetings were aimed at addressing the commercial differences in the achievement of a Final Investment Decision (FID) for Uganda’s upstream and EACOP projects. Among the stumbling blocks for Uganda and its partners were disagreements on the treatment of some taxes and other project-related expenses.

In September, 2019, Total suspended its technical activities on the EACOP following the collapse of Tullow’s proposed sale of its Ugandan interests worth US$900 million.  Pierre Jessua told The Independent at the time that Total could not continue with its technical activities “when they don’t see a breakthrough on a shareholding agreement and the legal framework for the pipeline.”

“The reality is that we had to suspend technical activities of the pipeline but of course we kept the commercial, legal and contractual teams mobilized to discuss and work with our partners and the governments,” he said.

In April, this year, Total and Tullow reached an agreement for the French firm to take its entire33.33% stake in licences in Uganda as well as its stake in the pipeline for US$ 575 million. That deal is still awaiting approval by the government but senior government officials have intimated to The Independent that the transaction is “almost done but there are a few boxes that remain to be ticked internally.”

Whenever the Tullow sale is approved, Total will take the lead role in developing the pipeline and the Lake Albert project alongside CNOOC Uganda Ltd, a subsidiary of the China National Oil Company.

Uganda and Total have also 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 in Uganda.

Both Total and the government signed the Deed of Assignment in relation to the Blocks 1, 2 and 3A Production Sharing Agreements and the Deed of Novation and Amendment with UNOC in relation to the Joint Operating Agreement in respect of Exploration Areas 1, 2 and 3A.

Efforts to talk to Peter Muliisa, UNOC’s Chief legal and Corporate Affairs Officer were futile but a senior government official in the Energy ministry official who is not supposed to talk on behalf of UNOC told The Independent that these agreements will now allow UNOC to participate in meetings with the other partners in Uganda’s oil development project since UNOC has a carry forward interest of 15%.

Going forward, Kasande said once Total and to some extent CNOOC reach FID, this will ensure the two companies move quickly to tender contracts for the engineering, procurement and construction phase for the production facilities (Tilenga) and oil pipeline.  He said about the US$16 billion will be spent on these projects once the oil companies reach the final investment decision.

Kasande told The Independent that Uganda retained 30% or US$900 million of the US$ 3.5 billion that was sunk into the economy during the appraisal phase. If the same arithmetic is applied, US$ 5billion could remain in the local economy. That would ensure a quick turn-around for the economy that has been battered by COVID-19, he said.

However, the permanent secretary was non-committal on putting a definite date on when the oil companies would reach FID. Still, he is hoping that that all-important decision will be reached before the close of 2020.

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