CNOOC Limited and Tullow Oil plc entered into an agreement on March 29 for the Chinese company to acquire Tullow’s one-third interest in Exploration Areas 1, 2, and 3A in Uganda.
Total consideration of the transaction is approximately US$1.467 billion in cash, subject to closing adjustments.
Completion of the transaction is subject to certain terms and conditions, including government and regulatory approvals by the relevant authorities in Uganda and the People’s Republic of China. The transaction is expected to be completed in the first half of 2011.
In a separate parallel transaction, Total also entered into agreements with Tullow for the acquisition of a one third interest in EA 1, 2, and 3A.
Upon completion of the two transactions, CNOOC, Tullow, and Total will each hold a one-third interest in the above areas. The project partners have agreed that the operatorship shall be determined by the government of Uganda upon completion of the transaction. It has been proposed that CNOOC, Tullow, and Total will each assume operatorship in relation to the interests in EA 3A, 2, and 1, respectively, after a transitional period during which Tullow will act as an interim operator in the above areas.
EA 1, 2, and 3A are located in the Lake Albert Rift Basin in Uganda, which is one of the most important prospective basins onshore Africa. As estimated by Tullow, more than 1 billion barrels of P-50 recoverable volume of oil has been discovered since 2006.
CNOOC, Tullow, and Total will coordinate their operations and integrate development plans across the three exploration areas in the Lake Albert Basin. It is expected that the basin-wide production rate will eventually exceed 200,000 barrels of oil per day.
Yang Hua, CEO of CNOOC, commented, “The transaction signifies another milestone for CNOOC Limited to grow its overseas business by entering into Lake Albert Rift Basin, one of the key frontier basins in East Africa. As one of the project operators, the company will apply its strong operational capability and work closely with our partners to accelerate the basin-wide development. I believe our investment will create considerable value for our shareholders, while contributing to Uganda’s economic growth and social welfare for local people.”
Li Fanrong, CNOOC president, added, “The project is expected to become one of the largest oil and gas developments onshore Africa in recent years. The transaction will help us establish our second major production province in Africa following Nigeria, and contribute to our long term growth as we proceed with intensive exploration and development programs with our partners in the next three to five years.”