Tullow in $2.9bn Uganda deal

City A.M. Reporter
OIL explorer Tullow has agreed to sell stakes in its Ugandan operations to France’s Total and China’s CNOOC for $2.9bn (£1.8bn), bringing in big partners to develop the oil fields.

Tullow said it agreed to sell each company a one third interest in fields around Lake Albert, which Tullow estimates to contain 1bn barrels of oil, and potentially as much as 3.5bn barrels. Tullow will retain a third share.

Analysts said the price was in line with expectations

The deal leaves unresolved a massive tax dispute with the government. Uganda’s energy minister Hilary Onek said the country would receive a total of $472m in taxes from the farmdown deal. Tullow, however, said this figure was calculated incorrectly and that it believes the total liability to be “significantly less” than the $141m it has agreed to deposit with the government pending discussions on the matter.

Additionally, Tullow, Total and CNOOC have agreed to deposit $313m with the government while Uganda pursues Heritage Oil, Tullow’s former partner in the fields, for $404m in taxes the government says is due on the sale of its interests to Tullow.

Tullow said it expected this money would be repaid but it was unclear if the companies will receive any interest on the deposit while the Heritage dispute rumbles on.

The matter is expected to take a year to settle.

Tullow said up to $10bn will be spent developing the field, partly on the construction of a small refinery and a pipeline to the East African coast – activities in which the oil explorer has little experience.