Museveni unhappy with Tullow bosses, chases them out of meeting

President Yoweri Museveni is not happy with the executives of Tullow Oil Uganda after it emerged they had been peddling lies about the taxes government expects to get from the company’s farm down process.

Sources say days ago Museveni chased Tullow Uganda CEO Jimmy Mugerwa and other company executives out of the meeting after discovering the lies that have caused the process to delay. Tullow Oil is yet to seal a capital gains tax deal in which is needed for the progress of the deal where the company wants to sell its stake in Exploration Areas 1, 1A, 2 and 3A to Total E&P.

Sources say the executives at Tullow Uganda don’t want government to get a fair share of revenue out of the transaction in which the company hopes to earn Shs3.3 trillion (US $900m). But their selfish actions have not gone well Museveni who wants the government to get a fair revenue out of the deal.

Government of Uganda and the JV Partners have been engaging in discussions to finalise an agreement reflecting the tax that will enable completion of the farm-down to take place. “Any capital gains tax is expected to be phased and partly linked to project progress.

In April Tullow Oil said the Uganda talks were expected to conclude but the process still goes and progress is also slower than expected. A tax deal needed to close the US $900 million (about Shs3.3 trillion) sale of a stake in its Ugandan fields to Total is pending and sources say Museveni is not happy at all.

“We continue to work constructively with our Joint Venture Partners and the government of Uganda to agree a way forward and the consequent timing of FID. Nevertheless, although negotiations continue, Tullow is currently considering all options in pursuing the sale of its interests in Uganda,” it said Tullow Oil days ago.

Barclays, one of the arrangers of the deal recently said the likelihood of a final decision on Uganda to come in as planned this year was declining.

“Tullow’s comment… indicates the potential for a fresh approach/structure to the deal that can be acceptable to all stakeholders, but increases uncertainty around the timing of the development,” said Barclays.

Tullow Oil in January 2017 announced plans to farm down its interest in Uganda’s Albertine Oil Project to Total for US$900 million.

Tullow Oil said in a statement issued then, “A Sale and Purchase Agreement with an effective date of 1 January 2017 has been signed in which Tullow has agreed to transfer 21.57 per cent of its 33.33 per cent interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total for a total consideration of $900 million.”

Tullow, Total and China’s CNOOC have hitherto all had equal stake of 33.3 per cent of the three exploration areas of Uganda’s Albertine Oil Project. It will be remembered that in line with the terms of its exploration MoU with the Government of Uganda, in March 2011, Tullow sold two-thirds of its exploration interest- one third each to Total and CNOOC at a combined value of US $2.9 billion.

The sale of the 21.57 per cent of share means that Tullow still retains an 11.76 per cent interest in the upstream and pipeline, which is expected to reduce to 10 per cent when the Government of Uganda formally exercises its right to back-in. Tullow intends to have a non-operated interest in the venture, that is, it will not have a management role.
Total on the other hand with a new accumulated 54.6 per cent shareholding will take the role of lead

Tullow Oil Plc expects a cash payment of US $100 million on its farm-down to CNOOC and Total, according to Paul McDade, Chief executive officer who presented the company’s financials for the year 2018.

At completion of the farm-down, Tullow also anticipates to receive a payment of the working capital completion adjustment and deferred consideration for the pre-completion period of US $108 million.

A further US $50 million of cash consideration is due to be received when the final investment decision (FID) is taken on the development project. “The JV Partners continue to work towards reaching FID for the development project around mid-2019. During 2018, the upstream and pipeline FEED were completed in preparation for the award of Engineering, Procurement and Construction (EPC) contracts in 2019,” he said.