Tullow inks Ugandan sale agreement with CNOOC, Total for $2.9B

By Phaedra Friend Troy

London-based Tullow Oil (LSX:TUL has successfully signed a Sale and Purchase Agreement for a stake in its Ugandan exploration permits with China's CNOOC (NYSE:CEO) and France's Total (NYSE:TOT).

For a total cash consideration of $2.9 billion, the agreement gives one-third interest to both Total and CNOOC for Exploration Areas 1, 2 and 3A in the Lake Albert Rift Basin of Uganda. Tullow is retaining a one-third interest in the acreage, and it has been proposed that each company will serve as operator of one of the blocks, with Total operating block 1, Tullow block 2 and CNOOC block EA-3A.

The three licenses span some 10,000 square kilometers, and exploration and appraisal drilling on the blocks has discovered more than 1 billion barrels of oil resources estimated.

“With this acquisition, we have entered a new oil province, giving us access to substantial proven resources and high-potential acreage," said Yves-Louis Darricarrere, president of Total Exploration & Production. "The size of the discoveries indicates that large-scale development may be possible. Plateau production could exceed 300,000 barrels per day, depending on the results of the future drilling program.”
Governmental Approval

By successfully completing the agreement, a key condition has been met on the Memorandum of Understanding between Tullow and the government of Uganda and the Uganda Revenue Authority. 

Additionally, under the MOU, Tullow and its new partners have been granted new exploratory licenses, including EA-1 and the onshore area of EA-3A, as well as the right to develop the Kingfisher oil discovery.  A clear plan for the resolution of the tax disputes for the asset sales have also been agreed upon.

Field Development

The project partners now plan on reactivating the exploratory and appraisal drilling program over the area, as well as progressing development plans for the Lake Albert Rift Basin.

“These agreements have secured the future of oil production in Uganda," said Aidan Heavey, chief executive for Tullow Oil. "Tullow, its partners and the Government of Uganda will now agree a development plan for the Lake Albert Rift Basin with a target of delivering production of at least 200,000 bopd and potentially much more as we continue to explore and appraise the basin."

The development plan for the Ugandan assets includes the installation of production facilities centered around the main production area in the northern part of the basin, with a secondary production unit in the southern portion. Additionally, an oil export pipeline will be built to carry production to the Indian Ocean.

Furthermore, the project partners, along with the Ugandan government, are studying and promoting the construction of a domestic oil refinery that will enable Uganda to benefit from the Lake Albert Rift Basin production.

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