The Ugandan government has finally allowed Tullow Oil to sell all its stake in the country’s oil and gas sector to French oil giant, Total E&P after months of a deadlock.
In April, the troubled oil firm announced the sale of its stake in Uganda’s oil project to French company Total Plc for US $ 575 million but this was subject to government’s approval.
However, in a statement released on Wednesday, Tullow announced that the ministry of Energy and Mineral Development and Uganda Revenue Authority had approved the deal worth $575 million (about Shs 2.231 trillion).
“Tullow Oil plc (Tullow) is pleased to announce that the Government of Uganda and the Ugandan Revenue Authority have executed a binding Tax Agreement that reflects the pre-agreed principles on the tax treatment of the sale of Tullow’s Ugandan assets to Total. The Ugandan Minister of Energy and Mineral Development has also approved the transfer of Tullow’s interests to Total and the transfer of operatorship for Block 2,” the company said in a statement.
Tullow however noted that all government-related conditions having been satisfied, they expect the transaction to close in the coming days after completing “certain customary pre-closing steps” with Total.
“Tullow will provide a further update once the transaction has closed and funds have been received. On closing, Tullow will receive $500 million consideration and a further $75 million when a Final Investment Decision is taken on the development project. In addition, Tullow is entitled to receive contingent payments linked to the oil price payable after production commences.”
Prior to the deal, Tullow was the operator of the 230,000 barrel per day Block 2 project whereas Total Uganda operated Block 1 and Block 1A and CNOOC Uganda Limited (CNOOC) operated Block 3A.
The Irish company announced that the cash consideration in the deal with Total consists of US$500 million payable at completion and US$75 million payable following the final investment decision of the Lake Albert Development Project.
Tullow Oil’s plan to sell its stake in the Ugandan oil project had stalled and called off due to a tax dispute with Ugandan authorities that saw Uganda Revenue Authority assess the tax at $300 million overall of Tullow’s assets valued at $900million.
Both parties however made headway early this year before Tullow finally announced the sale of its stake.