Uganda: Total-Tullow Oil Sales Deal Awaits Cabinet Approval

Last month's French oil giant Total E&P acquisition of Anglo-Irish Tullow assets awaits Cabinet approval before it can be endorsed by government, the Ministry of Energy has said.

Dr Goretti Kitutu, the Energy minister, last Friday said they are "waiting for this clearance" before the next step can be decided.

Ms Kitutu also showed optimism that they were looking at Final Investment Decision (FID) by the oil companies taken by August or latest, by the end of the year, especially following the Total E&P/Tullow sales deal, which once approved, will allow investment decisions to start.

The deal will see Tullow exit Uganda after 16 years of operation.

Total E&P announced last month that it had acquired Tullow's remaining 33.33 per cent stake for Shs2.1 trillion ($575m), with Shs1.8 trillion ($500m) paid once the deal has been approved by government, and the balance of Shs780 billion ($75m) paid whenever the FID has been reached.

Contrary to government's optimism, it is, however, unlikely that FID will be taken this year.

FID is an agreement on capital investments on a long-term project when the money for the project is availed and the project execution commences.

To start oil production, projections show that the oil companies, Total E&P and Cnooc, have to invest a minimum capital of $10b (Shs36 trillion); $6.7b (about Shs24 trillion in developing the oil fields--Tilenga fields in Nwoya/Buliisa districts and Kingfisher in Kikuube, and $3.55b (Shs13 trillion), for the export pipeline from Hoima to Tanga in Tanzania.

First oil production, both government and oil companies, say is three years from FID, which remains uncertain now.

With the Tullow acquisition out of the way, the next headache for government is the lingering issues on the crude oil pipeline, whose economics is now being questioned by Cnooc.

On Friday, Dr Kitutu, however, maintained that they are on steady progress towards first commercial oil production.

The minister made the remarks at the inauguration of the new oil sector regulator--Petroleum Authority of Uganda--a seven-member board whose tenure will run until 2024.

The members are Dr Jane Mulemwa, Mr Bernard Ongodia, Ms Doreen Kabasindi, Mr Kiryowa Kiwanuka, Dr Kevin Aanyu, Dr Noble Banadda, and Ms Lynda Biribonwa.

With the country revving for oil production, Dr Mulemwa said chronic underfunding for institutions like PAU that are meant to monitor the different activities is an obstacle.

She also cited adamancy by some oil companies as another challenge in their way.

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