Kampala, Uganda | THE INDEPENDENT | French oil major Total, the Ugandan government and Tullow have resolved tax disagreements that have delayed the sale of a $575 million stake that is key to ensuring Uganda produces first oil in three years’ time.
“Government of Uganda and the Ugandan Revenue Authority have executed a binding Tax Agreement that reflects the pre-agreed principles on the tax treatment of the sale of Tullow’s Ugandan assets to Total,” Tullow said Wednesday in a statement.
Tullow has been waiting since 2017 to close its divestment in the Lake Albert Development Project and shares were 39% higher at 23 pence early yesterday after the news broke. The stock is still 64% lower this year.
Total will pay $500 million in cash on completion of the deal and $75 million when a final investment decision on the project is taken. Tullow is also entitled to receive contingent payments linked to the oil price after production commences.
“With all the Government-related conditions to closing having been satisfied, Tullow expects the transaction to close in the coming days after completing certain customary pre-closing steps with Total. Tullow will provide a further update once the transaction has closed and funds have been received,” said Tullow in their statement.
This agreement comes a month after Total, Uganda and Tanzania agreed to fast track the oil pipeline EACOP deal.
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 had suspended its technical activities on the EACOP following the collapse of Tullow’s proposed sale of its Ugandan interests. 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.
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.