29th Aug 2019 15:49
(Alliance News) - Tullow Oil PLC said Thursday its farm-down with two partners has been terminated after failing to agree on tax details with the Government of Uganda.
The firm is now looking to sell down its stake in the Lake Albert project in the country.
The farm-down with French oil major Total SA and China National Offshore Oil Corp will be terminated at the end of Thursday after sale & purchase agreements expired.
Total's President of Exploration & Production Arnuad Breuillac said: "Despite the termination of this agreement, Total together with its partners CNOOC and Tullow will continue to focus all its efforts on progressing the development of the Lake Albert oil resources.
"The project is technically mature and we are committed to continuing to work with the Government of Uganda to address the key outstanding issues required to reach an investment decision. A stable and suitable legal and fiscal framework remains a critical requirement for investors."
Previously, the sale & purchase agreements had been extended but on this occasion the inability to agree all aspects of the tax treatment of the deal with the Ugandan government resulted in the termination of the deal.
The Uganda Revenue Authority could not agree with the partners with regards to tax relief for the consideration to be paid by Total and CNOOC as buyers.
"Tullow has worked tirelessly over the last two and a half years to complete this farm down which was structured to re-invest the proceeds in Uganda," Tullow Chief Executive Paul McDade said.
Following termination, oil and gas exploration firm Tullow will look to reduce its 33% stake in the Lake Albert project. Lake Albert has 1.5 billion barrels of oil in recoverable resources and was expected to produce over 230,000 barrels of oil per day at peak production.
Tullow did not indicate to what extent it planned to sell down its Lake Albert stake.
"Whilst this is a very attractive low-cost development project, we remain committed to reducing our operated equity stake," McDade added. "It is disappointing to report this news at a time when we are making so much progress elsewhere towards the growth of the group with our recent oil discovery in Guyana and the first export of oil from Kenya."
Shares in Tullow were 5.2% lower at 205.90 pence in London on Thursday afternoon. Shares in Total were 1.2% higher at 44.98p apiece.