Talks over Uganda-Tanzania crude oil pipeline deal to start soon
What you need to know:
- The Uganda government delayed sale of Tullow shares for months over tax issues until expiry of the Production Sharing Agreement (PSA) leading to stalling of the project.
- In September, 2019. Tanzania Petroleum Development Corporation (TPDC) director general James Mataragio said the reasons that caused the project to stall are normal in such under-takings. hence assured the public that the project would be implemented as per plans.
Negotiations for a Host Government Agreement (HGA) for the East African Crude Oil Pipe-line (EACOP) project will start soon, The Citizen reports.
This follows completion of Total Oil's acquisition of 33.334 percent of Tullow Oil's stake thus paving the way for the French oil giant to own a 66.7 percent of upstream stake in the project.
Also, this has given it legal ownership and the right to fast-track execution of the project. The HGA is an agreement between a foreign investor and the local government which is intended to reduce financial and political risks posed to investors by sudden changes in national laws.
The HGA outlines issues pertaining to tax and other revenues to be accrued from the project; participation of Tanzanians in the project and how to deal with challenges that might arise during implementation of the project.
HGA talks with Tanzania will start after the talks between Total Oil and Uganda are concluded.
They Will also come after the completion and issuance of an environmental impact assessment certificate by the National Environment Management Council (Nemc).
The EACOP national coordinator. Salum Mnuna, told The Citizen earlier this week that Tanzania's preparations for the HGA negotiations are at an advanced stage, and the talks would start anytime now.
"The team which is currently undertaking HGA negotiations in Uganda is the one that will engage with us here," he said adding that the target is to have the negotiations finalised by the end of September this year, so that further development activities can continue.
Upon completion of the HGA negotiations, focus will shift to other aspects of the project, including Land Lease Tenure, Shareholders Agreement (SHA) and the Ports Agreement.
According to Mr Mnuna, negotiations on the Land Lease Tenure are currently under the Chief Valuer.
"Once the agreements are completed, the project will reach the Final Investment Decision (FID) which sets the stage for further development of the project," he said.
The FID is the crucial step in a project that tells investors and shareholders that companies are ready to spend money on a new project, and that they expect the project, once fully operational, to make enough money to make the initial investment worth it.
Energy minister Medard Kalemani recently told Parliament that the project was expected to commence in April, 2021 after finalization of the FID.
He said during the 2020/21 financial year, the government would complete the ongoing social engagement with key stakeholders. It will also complete payment of the remaining Sin billion in compensations.
Earlier this month, a Total delegation led by President, exploration and production Arnaud Breuillac held talks with Energy Minister Medard Kalemani whereby they updated the Tanzania government on the new development.
Mr Breuillac said following recession in the global economy as a result of the Covid-19 outbreak, various international tender offers would be revised to reflect to the current market conditions.
Speaking during the meeting, Dr Kalemani said Total Oil has accepted his request to fast track the project expected to start in early 2021 and be completed before the 36 months set in the deadline.
"This is because the project has been delayed already," he said.
The Uganda government delayed sale of Tullow shares for months over tax issues until expiry of the Production Sharing Agreement (PSA) leading to stalling of the project.
In September, 2019. Tanzania Petroleum Development Corporation (TPDC) director general James Mataragio said the reasons that caused the project to stall are normal in such under-takings. hence assured the public that the project would be implemented as per plans.