Uganda’s government has set a new potential target of early next year for sanction of the long-delayed Lake Albert oilfield development and has thrown the ball back squarely in the court of Total and its partners over progress of the planned scheme.
The Kampala administration has given the French supermajor, Tullow Oil and CNOOC International a “solution” to overcome an impasse that has recently seen a $900 million farmdown deal from Tullow fall apart, in an effort to finally move the project forward.
Tullow had agreed with its two partners to farmdown a portion of its one-third stake in equal measure to Total and CNOOC. However, the deal encountered issues relating to capital gains tax with the government and recently expired.
This led the partners to halt all work on the Tilenga and Kingfisher oilfields development, with a final investment decision – which until recently was seen before the end of this year – slipping into next year at the earliest.
Irene Muloni, Uganda’s Minister of Energy & Mineral Development, said on the sidelines of the Africa Oil Week (AOW) conference in Cape Town on Wednesday that a solution offered to the trio of partners is intended to “get them back on board” and complete the farmdown deal.
Muloni said the original production licences awarded to the trio did not take into consideration Tullow farming down.
“Tullow decided to sell some of its shares to its partners… We have intervened and engaged with the companies, we have offered them a solution so that they can get back on board and close that transaction so that they can move on,” Muloni said.
“The production sharing agreements that we gave them clearly stipulated what each company is supposed to do. Tullow could have chosen not to sell some of its shares, because the PLs were not based on Tullow selling its shares.”
Muloni said she “wants the companies to make the final investment decision at the earliest (time) possible”.
“I implore them to get back to the table and resolve any issues with that transaction, because it is between them so that we can close that process,” she said.
“We are hopeful that between now and the end of the year they will re-engage and try to find a solution so that in the first quarter of next year they can take the final investment decision.”
If sanction can be taken next year, Uganda’s government is still targeting first oil in 2023. However, Muloni acknowledged that it would take two-and-a-half to three years, at least, to build the pipeline from Uganda to the Tanzania port of Tanga.
A final investment decision on both the upstream elements and the pipeline will be taken at the same time.
“So, for now, I think we are looking at 2023, and we need to strive and work very hard so that it does not slip again,” she added.
When questioned, Muloni would not reveal what the solution offered to the companies entailed – referring any questions to the trio of companies themselves.
“I don’t think it would be appropriate for me to start giving you the details of the solution for Tullow and its partners…
“On the part of government, our intention is to try to facilitate and support the process so that they can conclude the transaction quickly and take the FID.”
Speaking to Upstream at AOW, Tullow Oil chief executive Paul McDade was similarly loathe to disclose any details of the solution that has been offered to it, Total and CNOOC.
“The partnership is now very focused with the government on saying, ‘Let’s work together to get the right foundation to move this project forward’,” McDade said.
“It is important that each party understands each other and what it is going to take to make this sort of investment. I think the government has listened now to actions, and the actions are, ‘We want to invest in the project, we understand that you want us to invest in the projects – so let’s find the right middle ground and let’s get the paperwork done.’”
McDade added: “When that dialogue matures, I think all parties would be able to talk about a new FID date – I think it would be inappropriate to speculate what that would be.
“I think for Tullow that is the time to think about the farmdown.”