Energy and Mineral Development Minister, Ms Mary Goretti Kimono Kitutu, says the farm out deal where Total acquired Tullow’s entire interests in the Lake Albert development project is a big achievement for the government of Uganda’s goal of drilling and producing oil and gas in the Albertine belt.
This week, Tullow and Total signed a Sale and Purchase Agreement (SPA) effective January 1, 2020.
Tullow agreed to transfer all its interests in Block 1, 1A, 2 and 3A in the Albertine Graben and the East African Crude Oil Pipeline (EACOP) system to Total for a cash consideration of $575m and a potential contingent after first oil.
Dr Kitutu described the deal as a significant milestone in Uganda’s oil and gas sector.
“It is a critical development that takes the sector towards the Final Investment Decision (FID) that the country is eagerly waiting for,” she said.
According to the minister, the FID is expected to bring about $20b.
She promised that the ministry will help to expedite the farm out process through granting the necessary approvals for the conclusion of the transaction.
Uganda expects to earn Shs14.6m in capital gains from the deal. These will be remitted by Total Uganda on behalf of Tullow Uganda.
The tax has been revised down from $167m (Shs600b) which Uganda initially demanded. This tax has been the centre of misunderstanding between the government of Uganda and the oil companies, thus, affecting the progress of the FID.
In a ministry statement today, Energy and Mineral Development Permanent Secretary, Mr Robert Kasande, acknowledged that government and the oil companies had in principle agreed on the tax treatment transaction.
He also stated that government has also received the SPA from the two companies.
“The government has received the Sale and Purchase Agreement (SPA) from the oil companies which is being reviewed to facilitate grant of the necessary approvals and conclusion of the transaction.”