Total E&P, a multinational oil, gas, and petrochemical conglomerate has acquired its rival – Tullow Oil’s assets and interests in Uganda Lake Albert development project including the East African Crude Oil Pipeline.
The deal which was agreed in Paris, France, will see Total E&P pay Tullow $575 million (approx. Shs 2.1 trillion) with an initial payment of $500 million.
“Tullow has agreed to transfer its entire interests in Blocks 1, 1A, 2 and 3A in Uganda and the proposed East African Crude Oil Pipeline (EACOP) system to Total Uganda for cash consideration of $575 million plus potential contingent payments after first oil,” Tullow said in a statement on its website.
Tullow is currently the operator of Block 2 while Total Uganda is currently the operator of Block 1 and Block 1A while Block 3A is under CNOOC Uganda Limited.
Total said in a statement that the terms of the transaction have been discussed with the relevant Ugandan government and tax Authorities and agreement in principle has been reached on the tax treatment of the transaction.
Under the deal, Total is taking over Tullow’s existing 33.3% stake in each of the Lake Albert project licenses EA1, EA1A, EA2 and EA3A and the proposed East African Crude Oil Pipeline (EACOP) system. This transaction is however subject to the approval of Tullow’s shareholders, customary regulatory and government approvals, and to CNOOC’s right to exercise pre-emption on 50% of the transaction.
Patrick Pouyanné, Total Chairman and CEO said that the acquisition is in line with his company’s strategy of acquiring long-term resources at a low cost.
“This acquisition will enable us, together with our partner CNOOC, to now move the project forward toward FID (Final Investment Decision), driving costs down to deliver a robust long-term project,” Pouyanné said.
Tullow’s executive chairperson, Dorothy Thompson, said that the deal represents an excellent start towards the company’s target of raising in excess of $1 billion to strengthen the balance sheet and secure a more conservative capital structure.
“We have already made good progress with the Government of Uganda and the Uganda Revenue Authority in moving this transaction forward, including by agreeing the principles on tax treatment, and we will work closely with the government, Total and CNOOC over the coming months to reach completion as quickly as possible. We have also received strong support from our leading shareholders and look forward to receiving formal approval of this deal,” Thompson said.