Tullow secures deal in Uganda

TULLOW OIL has reached an settlement with the government of Uganda to develop its interests in the African state, the Irish exploration company has announced.

Tullow said it had signed a memorandum of understanding with the Ugandan government that would allow Tullow and its partners, the French oil giant Total and China National Offshore Oil Corp (CNOOC), to develop three blocks in the Lake Albert Basin in Uganda’s rift valley. These are expected to produce up to 200,000 barrels of oil per day within the next four to five years.

In a statement issued after European stock markets closed yesterday, Tullow described the agreement as “a huge achievement” and said it “looks forward to working closely with the government of Uganda over the coming years”.

The memorandum of understanding is expected to resolve an impasse in relation to the changing ownership of the exploration area.

Tullow agreed to buy a Channel Islands-based operator called Heritage out of its share of blocks 1 and 3A in the Lake Albert licences for $1.35 billion early last year.

This deal was to give Tullow sole control of three blocks in the area, which has resources of more than 2.5 billion barrels of oil.

However, Heritage and the Ugandan authorities became locked in a dispute relating to Heritage’s capital gains tax liability on the transaction, holding up the deal. Separately, the Ugandan government cancelled Tullow’s licence for the Kingfisher field in block 3A.

Tullow’s agreement with the government gives it the go-ahead to develop the Kingfisher field, as well as approving its purchase of Heritage’s share. However, the crucial aspect of the agreement is the government’s official approval of Tullow’s subsequent decision to transfer a one-third interest in the area to Total and CNOOC.

Tullow’s investment in Uganda is expected to reach $10 billion over the next decade.