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Government Yet to Approve Tullow, Total USD 900 M Deal

Total EP Uganda and Tullow entered into a package agreement in January 2017, under which Total was to acquire an additional 21.57 percent interest from Tullow in the Albertine Graben. It was anticipated that the over three trillion Shillings USD 900 million farm down deal would be sealed by mid this year with government approval.
15 Sep 2017 09:46
Still Talking? Total Uganda General Manager , Adewale Fayemi (L) Speaking to Tullow GM, Jimmy Mugerwa at a recent meeting in Kampala.

Audio 1

The government is yet to approve proposed plans by Tullow Oil to sell the majority of its stake in Lake Albert to French giant Total E&P Uganda.

Total E&P Uganda and Tullow entered into a package agreement in January 2017, under which Total was to acquire an additional 21.57 percent interest from Tullow in the Albertine Graben. It was anticipated that the over three trillion Shillings (USD 900 million) farm down deal would be sealed by mid this year with government approval.

Energy and Mineral Development Minister, Engineer Irene Muloni told journalists in Kampala that indeed Tullow Uganda had notified her ministry about the planned transaction that would see Total holding a 54.9 percent interest in the Albertine Graben. 

She, however, says no progress has been made almost nine months after Tullow and Total agreed to the farm down at USD 900 million. The amount according to the agreement was representing a reimbursement of a portion of past costs, payable in instalments along the development of the project, with an initial payment of USD 100 million.

Muloni says Tullow, Total E&P and CNOOC have to agree on the modalities of the farm down before the government takes a position.

//Cue In; "It is a process….

Cue Out… take the process on."//

Under the terms of the deal, Total E&P would acquire 21.57 perfect out of Tullow's existing 33.33 percent stake in the entire Lake Albert project licenses in four exploration areas held by Tullow. Total already operates licenses in two of the four exploration areas.

Total Chairman and CEO, Patrick Pouyanné then indicated their increased share in the Albertine would bring significant value to Total. As a major shareholder in Albertine, Total hoped to be prime positioned to benefit from the huge explorations in the country.

In March 2017 Chinese state-owned China National Offshore Oil Corp (CNOOC) however exercised its pre-emption rights under the joint operating agreements by expressing a desire to acquire half of the 21.57 shares Tullow Oil Plc had sold to Total E&P.

The three, according to the Minister, seem to be still engaged in negotiations.  Efforts by URN to seek comment from Tullow Managing Director, Jimmy Mugerwa were futile. His mobile phone was ringing but could not be answered on Thursday evening. The General Manager Total E&P Uganda, Adewale Fayemi could not be reached on phone.

Though the government says it is waiting for the three Joint Venture Partners to approach it for a final decision, sources indicate that the process seems complicated and may take longer than expected. 

Some government officials at the Ministry of Energy are reportedly not in favour of Total acquiring majority stake in the Albertine fearing that it would turn into a monopoly in the sector.

The government previously asked Tullow to farm down part of its stake Total and CNOOC. Tullow sold 16.7 percent of its stake in and there breaking its monopoly in the sector.