Uganda’s Oil Sector Faces Doom As Total SA Pulls Out Of Tullow Oil Deal

Uganda’s Oil Sector Faces Doom As Total SA Pulls Out Of Tullow Oil Deal

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By Andrew Irumba

Uganda’s Oil Sector has been hit a blow after Total SA suspended its planned USD3.5Bn crude export pipeline from Uganda to Tanzania.

The shocking development came after  Total’s botched deal to buy a stake in  Tullow Oil Plc’s oil fields in Uganda.

Total, the French oil conglomerate, terminated all activities related to the 1,445-kilometer (898-mile) conduit from its crude fields in Uganda to Tanga in Tanzania because shared ownership in the project was to be determined upon the completion of the Tullow deal, an official familiar with the project at Total’s Ugandan office said, by this failed.

SpyUgansa has learnt that last week, Tullow Oil was forced to rescind plans to sell a stake in its Ugandan project to Total and China’s CNOOC Ltd and restart the process from scratch after a disagreement over tax negotiations between the two companies led to the collapse of the deal.

The termination of the agreement was a blow to Tullow, which had sought partners to help it develop about 1.5 billion barrels of recoverable oil in its Ugandan fields.

After Tullow discovered oil in landlocked Uganda in 2006, the country made ambitious plans to construct a 216,000-barrel-a-day pipeline and a refinery.

Its anticipated time line for delivering first oil from the project was adjusted multiple times. A recent government estimate stated that it would come online in 2022. A final investment decision on the project was targeted for the end of this year.

However, the project’s partners and Uganda’s government will have to come up with a sensible new target to give it the green light, Tullow Chief Executive Officer Paul McDade said after the company announced it planned to scrap the stake sale.

Total E&P Uganda, which was leading the pipeline project, dismissed employees who were set to undertake works on it, the official said. The explorer was involved in initial land acquisition in both countries, the official said.

Cnooc Uganda Ltd., which is jointly developing the country’s crude finds, suspended at least 12 employees following delays on the project, a company official familiar with the matter said by phone without providing further details.

However, Total’s decision also hit a big blow to the planned construction of an oil pipeline from Uganda through to Tanzania to a refinery that would process Uganda’s oil into finished products.

The development thus spells doom for Uganda’s oil industry and all the investments done in the Albertine Graben so far.

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