The China National Offshore Oil Corporation on Tuesday notified Tullow Oil Plc and Total SA that it will not acquire a stake in Tullow’s assets in Uganda.
Last month, the London-listed Tullow Oil and Total SA announced the sale of Tullow’s assets in Uganda’s Lake Albert oil project for $575m (Shs2.1 trillion). According to the joint venture partnership agreement of the three oil companies, Cnooc has a right of first refusal to acquire 50% of the assets on the same terms and conditions as Total.
However, in a statement issued on Thursday morning, Tullow Oil said Cnooc has decided not to exercise the rights. A source told this website that Cnooc felt left out of the transaction and decided to stay out, with Tullow and Total keeping the Chinese state-owned company out of negotiations for the second time; the first time was the initial farm-down deal announced in 2017.
The statement adds that “there are no changes to the previously announced transaction or timeline and Tullow continues to expect the transaction to complete in the second half of 2020.
“The transaction remains subject to a number of conditions, including approval by Tullow’s shareholders, customary government and other approvals and the execution of a binding tax agreement with the government of Uganda and the Uganda Revenue Authority that reflects the agreed tax principles previously announced.”
Cnooc’s pulling out means that the tax agreement “can now be progressed,” Tullow said.
The latest development means that Total will meet the full costs of the deal. According to last month’s statement, Tullow will be paid $500m once the deal has been approved by the government and $75m paid when a final investment decision has been reached.
Ministry of energy officials said they are waiting for approval from the cabinet before they can greenlight the deal.
If approved, Total E&P Uganda will become the majority shareholder in Uganda’s oil project with a 66.6% stake, while Cnooc will retain its current 33.3% shareholding.