BIG DECISION: Oil production equipment

Tullow Oil and its partners-Total AND CNOOC expect to make a Financial Investment Decision (FID) around end of year, the giant company which launched its oil activities in Uganda 13 years ago says in its latest Trading Statement and Operational Update, whose official report is to be released next month.

“Key work programme activities such as … Geophysical and Geotechnical surveys are underway. Based on the progress with these activities, Tullow and its partners are working toward project FID around the end of the year,” the brief statement reads in part.

Tullow Oil says that oil pipe agreement signed between Uganda and Tanzania towards the end of May is a big step forward for investment in the country’s oil and gas sector.

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“The pipeline FEED and ESIA are progressing well and both are expected to be completed in advance of FID,” it says.

FEED stands for front-end engineering design which includes technical issues and rough investment cost, whereas ESIA stands for Environmental and Social Impact Assessment.

On January 9, 2017, Tullow announced that it had agreed a transfer of 21.57% of its 33.33% assets in Uganda to Total for a total of USD$900 million.

This forced CNOOC to exercise its pre-emption rights under the joint operating agreements between Tullow, Total and CNOOC to acquire 50% of the interests being transferred to Total on the same terms and conditions that were agreed between Tullow and Total.

Tullow says it is now working with Total  and  CNOOC  to  conclude  definitive  sale  documentation  in  relation  to  the  farm-down. But the company (Tullow Oil) adds the completion of the transaction is subject to certain conditions, which include approval by the Government of Uganda.

According to Aidan Heavey, the CEO Tullow Oil, to date, his company has done more than USD$200 million worth of business with 550 local companies, much as it continues to rely on international suppliers to deliver services which require deep technical and industry knowledge, such as well engineering.

The Government of Uganda is expected to get around 80% of net revenues, after the exploration costs are recouped. The potential value of Uganda’s oil reserves discovered to date amounts to around USD $100 billion.

Based on current estimates of costs and the future price of oil, Uganda’s share could amount to USD$50 billion, says the company’s General Manager Jimmy Mugerwa.

Uganda has proven crude oil reserves of 6.5 billion barrels, about 2.2 billion of which is recoverable.

Tullow  is  a  leading  independent  oil  and  gas,  exploration  and production  group, quoted  on  the London,  Irish  and  Ghanaian  stock exchanges.  The  Group  has  interests  in  over  100  exploration  and  production  licences  across  18  countries.