Kampala, Uganda | THE INDEPENDENT | A deal in which Irish firm Tullow Oil sold all its interests in the Lake Albert oil project to France’s Total E&P has been hailed as a win for the country and all stakeholders involved.
African Energy Chamber, a think tank on oil and gas has said the deal was a win for the buyer, the seller and the country.
On April 23, 2020, Tullow announced it was selling all its interest in Uganda’s sector to Total E&P at USD 575 million (Shs 2.2 trillion) plus potential contingent payments after first oil. This means Tullow exits the country.
African Energy Chamber says in a statement that for Total, the win is in the fact that “it ends up acquiring Tullow oil’s entire interests in the Lake Albert development project for less than $2 per barrel” – widely considered a bargain.
For Tullow oil, whose debt is rising and who is looking at raising $1bn, wins by having sold key assets and gotten some money.
Tullow shares rose on the announcement of the deal, indicator investors were happy with the offloading of the interests.
For the country, the agency says, it is a win for Uganda’s oil industry and local jobs. Also, Uganda will receive tax on capital gains of USD 14.6 million (Shs 55.6bn).
“After years of deliberations and debate, the closing of the sale allows the country and oil companies to move the conversation towards Final Investment Decision (FID) and practical project’s development,” it says. FID refers to the decision made by the various partners to invest in Uganda’s petroleum resource and commercialise it.
The agency adds that “It also sends strong signals to the rest of the region and Kenya in particular to do everything possible to unlock their oil and gas potential.”
This analysis rhymes with what many analysts have said about the deal. Lawyers at Kampala Associated Advocates (KAA) said in their analysis that the significance of this transaction cannot be overstated.
“It comes at a time of historically low oil prices and a world that is in peril. The fact that this deal could be done in this environment is a huge vote of confidence in the Lake Albert project, Uganda’s investment climate and takes us much nearer to FID,” the lawyers wrote in a brief to clients.
African Energy Chamber says the deal “is very competitive even in a depressed low oil prices environment.”
The Lake Albert project also called the Tilenga Project has a production capacity of up to 230,000 barrels per day propelling Uganda in the top 5 of sub-Saharan Africa’s oil producers.
The country has 6.5 billion barrels confirmed with 1.4 to 1.7 billion barrels commercially viable.