Tullow, Uganda sign MOU over $2.9 billion asset sale to CNOOC, Total
BY NICHOLAS BARIYO
KAMPALA, Uganda -- U.K.-based Tullow Oil PLC signed a memorandum of understanding with the Ugandan government to complete the much-delayed sale of part of its stakes in the country oil assets to Frances's Total SA and China's CNOOC Ltd. for $2.9 billion, officials said.
The deal is expected to ultimately unlock $10 billion worth of investments in Uganda's nascent oil sector that Ugandan geologists suggest could contain as much as 6 billion barrels of oil.
Government and company officials said Friday the sales deal is expected to be completed in the "next few days."
Friday's signing involving assets in Uganda's Lake Albertine Rift Basin should enable Tullow to complete the sale of two thirds of its stakes in three exploration blocks there to Total and CNOOC.
The MOU and the renewal of licenses were key to the conclusion of the deal with Total and CNOOC, said Irene Muloni, Uganda's energy and minerals minister.
Part of the hurdle to the finalizing the sale was the licenses, the minister said. Apparently, the licenses of two of the three blocks had expired, so the farmdown could not proceed, until Tullow secured the renewal. Now that the government has renewed the licenses and agreed on the stabilization and construction of a refinery, Tullow is free to go ahead and complete the farmdown, she said.
"This farmdown will facilitate raising the required capital for development of the oil fields," the minister said.
Jimmy Kiberu, Tullow corporate affairs manager, said the signing included the new licenses for exploration areas 1 and Kanywataba in the basin and that the company has also been awarded the Kingfisher production license which had expired in 2010.
"I look forward to working in partnership with the Government of Uganda and CNOOC and Total as we progress this world-class asset," Aiden Heavey, Tullow chief executive said after the signing.
The deal, agreed early last year has been dogged by snags, ranging from tax disputes to disagreements over oil production plans.
Tullow estimates that three oil blocks contain as much as 2.5 billion barrels of oil.
According to the Ugandan government, oil reserves in the basin could be as much as 6 billion -10 billion barrels with more exploration works, less than 40% of the basin has so far been explored.
Uganda is expected to start oil production in the next couple of years and output could hit as much as 350,000 barrels of oil day by 2018.
Dow Jones Newswires
02/03/2012