Why Tullow Oil is Considering Selling All Its Assets in Uganda

Tullow Oil is considering selling all its assets in Uganda as the firm down tax dispute rages on.

The Irish company, which also owns Tullow Operations Uganda, has hinted on the slow progress towards resolving a Capital Gains tax dispute on the USD 900 million firm down to Total and CNOOC Uganda Limited.

Tullow in early 2017 announced that it was selling its stake to Total E&P at USD 900 million. While the government agreed to the sale, it asked Tullow to pay over 600 billion shillings (USD 167 million)

During a meeting with President Yoweri Museveni, in January 2019, the Chief Executives of Tullow and Total agreed on principles for the tax treatment of the farm-down to CNOOC and Total.

But Tullow Chief Executive Officer Paul McDade says Tullow and its partners Total and CNOOC Uganda Limited have so far not been able to finalise the agreement with the Government of Uganda. He said in a statement that Tullow is currently considering all options in pursuing the sale of its interests in Uganda.

“We continue to work constructively with our Joint Venture Partners and the Government of Uganda to agree on a way forward and the consequent timing of FID. Nevertheless, although negotiations continue,”  McDade said.

He said the Joint Venture Partners continue to work towards reaching Final Investment Decision for the development project in the second half of 2019 with the project’s technical aspects now completed.

On the East Africa pipeline (EACOP), McDade revealed that Geotechnical and geophysical surveys for the project have been completed for the entire route across both Uganda and Tanzania.

He revealed that there are ongoing EACOP discussions between the Joint Venture Partners and the Governments of Uganda and Tanzania regarding key commercial agreements which are required prior to Final Investment Decision.

It has been learnt that most of the host government agreements between the Governments of Uganda and Tanzania have not been signed as Inter-Governmental agreement signed in 2017.

The delay in concluding the Host Government Agreements and failure to agree on a way forward on the tax dispute could further first oil production earlier slated for 2020.

Some observers last week said the likelihood of a final decision on Uganda to come in the second half of this year is declining.

The issue of delayed oil production came up at the public hearings on the King Fisher Environment Social Impact Assessment hearing in Kikube and Hoima districts.

NEMA Board Chair, Professor Sandy Tickodri-Tigoboa was one of the speakers that expressed concerned about the delay in having Uganda’s oil out of the ground.

Petroleum Authority’s Director in Charge of Technical Support Services, Peninah Aheebwa without going into detail of why the delay said it could be for good reasons that Uganda has not rushed to production.

Meanwhile, the Tullow PLC boss says said they are delaying the final investment decision (FID) for its Kenya project to 2020.

“The Government of Kenya continues to make good progress, both in acquiring the land for the upstream and pipeline and securing water rights for the upstream. While these activities are progressing well, they are taking longer than originally forecast.

The National Environment Management Agency has requested that additional community consultation take place for the Environmental and Social Impact Assessments (ESIAs) which will now be submitted in the second half of 2019 which is later than anticipated.” Said McDade.

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