Tullow Oil terminated its farm-down agreement with Total and CNOOC in Uganda, following a lack of agreement with the Ugandan government over the tax terms of the transaction.
The London-listed Irish explorer said on Thursday that its farm-down is to terminate at the end of the day, August 29th, following the expiry of the sale and purchase agreements (SPAs).
The irishtimes.com reports that despite previous extensions to the SPAs having been agreed by all parties, Tullow said it has been unable to secure a further extension of the SPAs with its joint venture partners.
This is due to being unable to agree all aspects of the tax treatment of the transaction with the Government of Uganda, which was a condition to completing the SPAs.
In the recent statement, Oil giants Total have re-affirmed their commitment to progressing the development of the Lake Albert oil resources, despite SPAs with Tullow collapsing.
Total has today also acknowledged time had run out on the SPAs, but committed to continue working to reach an investment decision with the Ugandan government.
“Despite the termination of this agreement, Total together with its partners CNOOC and Tullow will continue to focus all its efforts on progressing the development of the Lake Albert oil resources,” declared Arnaud Breuillac, President Exploration and Production of Total.
The project is technically mature and we are committed to continuing to work with the Government of Uganda to address the key outstanding issues required to reach an investment decision. A stable and suitable legal and fiscal framework remains a critical requirement for investors.”
Total is a major energy player that produces and markets fuels, natural gas and low-carbon electricity. Total chairman is Patrick Pouyanné.
FULL STATEMENT
On January 9, 2017, Total and Tullow entered into a Sale and Purchase Agreement (SPA) whereby Total would acquire 21.57% out of Tullow’s 33.33% interest in the Lake Albert licenses. CNOOC exercised its right to pre-empt 50% of the transaction. As a result, Total and CNOOC would have each increased their interest to 44.1% while Tullow would have kept 11.8%.
Since 2017, all parties have been actively progressing the SPA. However, despite diligent discussions with the authorities, no agreement on the fiscal treatment of the transaction has been reached. The deadline for closing the transaction has been extended several times, clearly demonstrating the endeavors of the parties to find an agreement. The final deadline will be reached at the end of today, August 29, 2019, and as such, the Acquisition Agreement will be automatically terminated.
Total’s interest will therefore remain at 33.3% on blocks EA1, EA2 and EA3 prior to the 15% national company back-in, Total being operator of the block EA1 which contains the largest part of the reserves. Total keeps the right to pre-empt any future transactions, in case any party divests part or all of its interest.
Additional Info: Independent Ug
