Ugandan president, Total boss meet over oil production

President Museveni on Monday met the French oil giant Total’s chief executive and board chairman, Mr Patrick Pouyanné, as part of efforts to fast track the ongoing back-to-back activities leading to Final Investment Decision (FID) scheduled for later this year.

Mr Pouyanne, who was accompanied to the State House Entebbe meeting by among others, Total’s senior Africa vice president for exploration and production, Mr Guy Maurice, was in the country early this year in January for the same.

The two sides agreed during the January meeting to “meet more regularly” to review progress [as a show of support] of the ongoing back-to-back upstream (development of oil fields) and midstream (pipeline) activities.

Sources told Daily Monitor that the Monday meeting mainly reviewed progress of negotiations of the Host Government Agreement (HGA) for the proposed East African Crude Oil Pipeline (EACOP), and the Anglo-Irish Tullow Oil’s farm down transaction, which is expected to give Total EP & China’s Cnooc equal 37.5 per cent shareholding.

Sources revealed that most of the sticky issues in the HGA, which details among others governmental obligations, investor duties, environmental and other relevant standards, liability, and closure of the project, have been ironed out.

The Monday meeting also noted that the remaining issues be addressed by end of this month and signed as soon as possible. Chief among the remaining sticky issues in the HGA, sources said, is the incorporation of the holding company for the pipeline.

The oil companies — Total E&P, Cnooc, and Tullow — had initially suggested domiciling the pipeline holding company in the United Kingdom with branches in Uganda and Tanzania, the idea which the Ugandan negotiating team has since acquiesced to provide its major operations in Uganda, but Tanzanians remain opposed to it. The two sides are scheduled to meet later this month in an attempt to harmonise the position on the issue.

Uganda and Tanzania are negotiating parallel HGAs with the oil companies, but which have to be harmonised before signing. Closing of the negotiations and signing of the HGA is scheduled by latest mid-June, the Monday meeting resolved.

The HGA is the precursor to the remaining agreements such as the Shareholders Agreement, Project Financing Agreement and Transportation Agreement, that will operationalise the multi-billion-dollar project.

The Monday meeting, sources revealed also, reviewed progress of the Tullow Oil farm down, notably the ongoing negotiation of settlement agreement for the transaction. Tullow sold 21.57 per cent of its stake in the oil fields — Exploration Areas (EA): EA3 (Kingfisher) with one production licence, and EA 3A and EA2 (now called Tilenga) with nine production licences — to Cnooc and Total E&P, respectively, for $900m (about Shs3.4 trillion).

The tax assessed off the transaction was $167m (Shs600b), which at first remained a bone of contention. After protracted discussions including with the Tullow top executives, the company offered to pay $85m (Shs316b).

During his January visit, Mr Pouyanne committed to payment of the remaining $82m (Shs302b), borne together with Cnooc; a matter that remains a subject of discussion to close deal.

Closure of the transaction is key both in the negotiations for the pipeline and oil development of the oil fields as they (companies) have to sign a joint operating agreement — which details underlying contractual frameworks on tasks. The shareholders in the pipeline, for now, include Uganda through the Uganda National Oil Company: the three oil companies — Total E&P, Cnooc and Tullow — and Tanzania through its national oil company, Tanzania Petroleum Development Corporation (TPDC).

Source: Monitor

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