Page 4 - AfrOil Week 26

AfrOil CoMMEntaRy AfrOil
Tullow’s East African crawl
Progress in Uganda has become so painful for Tullow that the company is considering a sale
Uganda KEnya
WHat:
The lake Albert partners are making slow progress in talks with the government.
WHy:
Oil was discovered in uganda in 2006. while Kampala has shown little signs of urgency, Tullow’s patience is fraying.
WHat nExt:
Delays have also slowed progress in Kenya but an important agreement was signed last week.
KENyA and Uganda are once again in an appar- ent competition to see which country can delay a nal investment decision (FID), and therefore rst oil. Tullow Oil issued a statement on June 26 saying that the FID in Kenya was now expected in 2020. It had hoped to reach this milestone this year.
In Uganda, meanwhile, Tullow took a more negative stance, saying that while it intended to reach FID on the development plan in the second half of this year, it was “considering all options in pursuing the sale of its interests in Uganda”.
Museveni on my mind
e problem in Uganda appears to be in the Lake Albert group’s relations with the government. ese have been prickly for some considerable time, largely over tax payments.
A similar problem appears to be thwart- ing progress. Tullow noted that it, and Total, had held talks with Ugandan President yoweri Museveni this year and that principles for how a farm-down should be treated for tax were agreed. Tullow has struck a deal to sell down stakes in the development to its French and Chi- nese partners, which should leave it carried until rst oil.
Tullow said that despite this broad tax agree- ment, the group had been unable to nalise the deal with the Ugandan government. e company
Hoima-Tanga pipeline Source: Total
said it was working constructively on agreeing a “way forward and the consequent timing of FID”, but noted it was working on sale options.
The various technical aspects of the plan have been completed, it continued. e envi- ronmental and social impact assessment (ESIA) on Tilenga was approved by the National Envi- ronment Management Agency (NEMA) and the ESIA for King sher is underway, with public hearings. Tilenga is being driven by Total, while CNOOC Ltd operates King sher.
Surveys on the geotechnical and geophysical on the East Africa Crude Oil Pipeline (EACOP) have been completed for the entire route through Uganda to the port of Tanga, in Tanzania. yet more discussions are being held between the government and the joint venture partners on commercial agreements on EACOP, which are required to be resolved before FID.
A report in e Independent, Uganda’s news- paper, said Museveni had cancelled a meeting on June 5. e newspaper said this had postponed the start of oil production again.
e Independent said the points of conten- tion were the midstream and the capital gains tax. e oil companies had made various o ers in order to make progress, but the president had “rejectedalltheirdemands”,leadingtothemeet- ing being cancelled.
Completion of the deal should contribute around US$200 million to the company’s under- lying free cash ow, from US$450 million for the full year.
Further complicating plans for Uganda’s Lake Albert development, Total faces legal action over its plans. Friends of the Earth France, Survie and others gave notice on June 24 that Total had failed in its corporate responsibilities to monitor work
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w w w . N E W S B A S E . c o m Week 26
02•July•2019