Last year in September 2019, the Farm Down Agreement of Tullow Oil was supposed to be traded to Total E&P Uganda. This was a long and prolonged negotiations, as the British Tullow Oil has been in dispute of taxation and payments of fees the Government of Uganda, which was deemed as the “Presidential Handshake”.
What happen yesterday with the Financial Investment Decisions (FID) of Total, as it has taken over the stakes of Tullow Oil. While agreeing on added terms in combination with the China National Offshore Oil Corporation (CNOOC) to drill after petroleum in various of blocks on Lake Albert, also build the petroleum pipeline from Hoima to Port Tanga, Tanzania.
The Port Tanga and Pipeline agreement was sealed in 2017 between the Government of Uganda (GoU) and Government of Tanzania (GoT). That after lots of meetings and consultations between the parties. There was some who even tried to get it Port Lamu in Kenya, but that was ditched. Also, causing a rift between Dodoma and Nairobi.
Now, the next step is that Total and CNOOC is able to get a Host Government Agreement (HGA) for the East Africa Crude Oil Pipeline (EACOP) project. That was agreed by the parties in Entebbe for the territory of Uganda, but it is not sealed with Tanzania.
Though it should be in the interest to sign an agreement with President Magufuli and the CCM. Now, that they have fixed the first part and the licences to drill on Lake Albert. Total and CNOOC needs the HGA in Tanzania too. That will be beneficial for the Republic there too.
This has been a long time… the first reports of agreements and production licenses to blocks on Lake Albert in early 2000s. This was agreements being made between the government and the Tullow/Heritage and ENI as well. Which later has caused rift between the companies and the Republic, as the Oil Companies wasn’t willing to pay taxes and the Uganda Revenue Authority (URA) needed to win a Court Case in 2014 to get taxes owned paid by Tullow, as they had to cover the loss of taxes from their acquisition of Heritage Oil.
So, the news today is big. Maybe, the President got another Presidential Handshake, as the Tullow Oil Taxes case brought a lot of kickbacks. The deals sealed between Museveni and Total is a secret. Therefore, only the agreement of what it does is in public, but not the costs, the tax-grade and the limitations of it. Total and CNOOC can have gotten it for cheap for all we know.
That is something for the time to tell. Now, the Lake Albert Basin, the Lake Albert Blocks for drilling is sealed, which has been in question and awaited a verdict for years. The same has the years of a agreement for a company to build the pipeline and pay the rates for having the operation going.
Now, there is one final agreement that needs to be sealed in Tanzania. By all means, the Republic’s needs also to settle the routes, the land-acquisitions and other arrangements too. While the other HGA is necessary to get started. As the process is now moving. The initial agreements are made, but the companies still needs goodwill elsewhere to make this pop-off. This will be years in the making. As the state of Uganda is scheduling a Oil Refinery in 2023, but that depends on everything else goes as planned at this point.
And in this business, at this point, everything that can be stalled and discontinued can happen. Even, if one of the companies stops seeing the financial viability and lack of profits. Than, they might suspend and try to sell the Producing Licenses Agreement to someone else again.
I wouldn’t be shocked, if Total bails out or something. There been so many companies involved and we are still not starting production. This being in the works since the early 2000s with the modern day deals and new arrangement for petroleum activity in the Lake Albert basin. That is why I am reluctant. Because, at any given moment, someone gives way and it sto