Friday February 3 2012

Tullow Oil, Uganda government sign asset sale deal

An oil rig being used to drill oil at one of the sites in the Albertine region.

An oil rig being used to drill oil at one of the sites in the Albertine region. Photo by Francis Mugerwa 

The Government of Uganda on Friday signed production agreements with Anglo-Irish firm Tullow Oil, allowing the company to finalise a long-delayed $2.9 billion asset sale to France's Total and China's CNOOC.

In March 2011, Tullow inked a deal to sell two-thirds of its Uganda assets to CNOOC and Total, but President Yoweri  Museveni refused to sign off due to a contractual dispute with the firm.

"Tullow Oil is pleased to announce that it has signed two new production sharing agreements with the government of Uganda," Tullow said in a statement.

"As a result of this signing, Tullow will now finalise arrangements with CNOOC and Total for completion of the farm-down."

Ugandan Oil Minister Irene Muloni said that the deals will allow the companies to finalise the sale of the assets.

"On the recommendation of the government, Tullow is expected to farm-down, or partly divest its assets in Uganda to CNOOC and Total as agreed, " Muloni said in a statement.

"The new licences being signed today are key to the conclusion of the farm down."

Museveni had refused to sign off on the sale agreement due to a disagreement with Tullow on whether a clause should be included in the contracts to protect the firms from potential future losses if the government changed the tax laws.

Muloni said that the company had agreed to the government's demands over the protective clause.

"Government's proposal to revise the standard stabilisation clause was accepted by Tullow and has been adopted," Muloni said.

She added that the company had also agreed to government demands that an oil refinery be built in the country and that plans for a pipeline to export crude would only be considered if more oil deposits are discovered.