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Energy Minister Welcomes Tullow Farm-Down Notification

The letter of notification sent early last week seeks governments permission to allow the planned sale of Tullows assets to proceed. Tullow Oil, in January this year, agreed to transfer 21.57 percent of its 33.33 percent interests in Lake Albert Development Project covering exploration areas 1, 1A, 2 and 3A to Total for a total consideration of USD 900 million 3.27 trillion Shillings.
14 Nov 2017 16:23
Engineer, Irene Muloni speakings to Total's Adewale Fyemi and Tullow, s Jimmy Mugerwa

Audio 2

Energy and Mineral Development Minister, Eng. Irene Muloni has confirmed receiving a notification from Tullow Oil Plc about plans to farm-down its assets in Uganda to Total E&P Uganda.

The letter of notification sent early last week seeks government's permission to allow the planned sale of Tullow's assets to proceed. Tullow Oil, in January this year, agreed to transfer 21.57 percent of its 33.33 percent interests in Lake Albert Development Project covering exploration areas 1, 1A, 2 and 3A to Total for a total consideration of USD 900 million (3.27 trillion Shillings).

This agreement will allow Tullow to retain an 11.76 percent interest in the upstream and pipeline, which would reduce to 10 percent when the Government of Uganda formally exercises its right to back-in.

The farm-down, however, was hit a snag after it emerged that Ministry of Energy and the National Oil Company (NOC) were opposed to Total taking up all of Tullow's interests because it was likely to make Total a monopoly in the Exploration areas.  It is emerging that Total and CNOOC have agreed to split up the shares under offer into two equal parts with each paying USD 450 million (1.6 trillion Shillings) to Tullow.

Muloni in an interview described the latest development as good news saying there is need to have a conclusion to the farm-down process which has been on since early January.  

//Cue In The letter of…….

Cue Out…. And the process continues"//

Muloni did not reveal further details but said her Ministry is happy that Joint Venture Partners have worked on a deal with the possibility of concluding it.

Adewale Fayemi, the General Manager of Total E&P Uganda told URN that they hope to conclude the deal by early next year.

// Cue In " Yes the farm-down

Cue Out….that is it"//

Fayemi was reluctant to reveal what is remaining for the farm-down to be concluded. However, he confirms that Total agreed to the right by CNOOC' to preempt and that that preemption has taken place with an agreement that the interests on offer will be split into two equal parts.

The farm-down which has to be approved by the government is based on the transfer of license interests from Tullow to Total and CNOOC in exchange for cash and deferred consideration to be paid as and when the Lake Albert Development Project reaches a series of key milestones.

The Lake Albert Development Project is a major development which expects to achieve around 230,000 barrels per day when it reaches a plateau.

Development Plans were approved by the Government in August 2016 which Tullow expects will require USD 5.2 billion (18 trillion Shillings) gross of upstream capex to develop the first 1.2 billion barrels of oil with USD 3 billion (10 trillion Shillings) expected to be required to reach First Oil around three years after Final Investment Decision has been taken.

The Government of Uganda agreed to an export route through Tanzania and the current estimate for the pipeline capital cost is around USD 3.5 billion (12.5  trillion Shillings).

The pipeline is expected to be funded through a combination of debt and equity. Tullow carries approximately USD 1.7 billion (6 trillion Shillings) for Uganda which includes fair value allocations and capitalized interest.