On Nov.10, Tullow Oil plc announced the completion of the sale of its assets in Uganda to French super major, Total. The US$ 575 million (Shs 2.15trillion) deal finally brought Tullow Oil’s 16-year involvement in Uganda’s oil project to an end.
Kampala, Uganda | RONALD MUSOKE | When Tullow entered Uganda in 2004, it quickly made several oil discoveries and by 2006 Uganda had been catapulted onto the map of emerging oil provinces—a development which excited Ugandans.
At one of the press conferences called to announce the new oil discoveries by Tullow, Hillary Onek, the then Minister of Energy and Mineral Development, wished Tullow would stay in Uganda for the next 50 years.
But soon Tullow and the government got embroiled in unending tax disputes surrounding the treatment of several transactions. Differences in strategy in commercialisation of Uganda’s oil resources also put the two parties on a perpetual collision course.
Tullow was soon pushed to rethink its future involvement in Uganda’s oil industry. Analysts in the oil industry say turbulence in the global oil market, which hit the company’s finances so much that the production performance for some of Tullow’s major assets in Ghana was deemed “significantly below expectation” by the company’s top executives, also fueled the decision.
In 2017, Tullow struck a deal with Total, one of its partners in the Uganda oil project, to farm-down its licences at US$900 million. Under the terms of the deal, Total would take over Tullow’s entire 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). However, the transaction collapsed after the government insisted that Tullow pay US$167 million before it could transfer its assets to Total. Negotiations would go on for two years with no deal in sight.
Suddenly, on April 23, this year, Tullow announced that it had finally reached an agreement to sell its Ugandan assets to Total. On July 29 Tullow Oil plc said in a statement that the company’s shareholders had agreed to the sale.
But over the next three months, the transaction was subjected to several other approvals including; the execution of a binding tax agreement with the Uganda government and the Uganda Revenue Authority. The two approvals were finally announced in October.
Going forward, Tullow will retain a financial link to the Lake Albert Development Project through potential contingent payments (when oil production eventually starts).
Rahul Dhir, Tullow’s Chief Executive Officer said the closing of the transaction with Total clearly evokes mixed emotions within Tullow.
“While we are sad to be exiting Uganda after many years, the US$575 million of proceeds form an important part of our plan to strengthen Tullow’s balance sheet and improve our financial position,” he said.
“We will watch the progress of Uganda’s oil and gas industry with much interest and all of us at Tullow wish the people and Government of Uganda and our former Joint Venture Partners every good fortune as they take this important project forward.”
Earlier on in April, Dhir’s predecessor, Dorothy Thompson, noted that Tullow is proud of its pioneering exploration work in Uganda.
“We are very proud of the role we have played in the founding and development of Uganda’s oil industry,” she said, “We wish all Ugandans and our joint venture partners well as they take this important project forward.”