Oil company, Tullow Oil plc says it remains committed to reducing its equity stake in the Lake Albert Development Project ahead of the delayed final investment decision (FID) and that when appropriate it will initiate a new sales process to achieve the now pending transaction worth US$900 million
Tullow retains a 33.33 percent stake in the Lake Albert project which has over 1.7 billion barrels of discovered recoverable resources and is expected to produce over 230,000 barrels of oil per day (bopd) at peak production. “The Joint Venture Partners remain supportive of the development and conversations with the Government of Uganda are ongoing, the company says briefly in the trading update for the period 24 July to 13 November 2019.
In August 2019, Tullow announced that its farm-down to Total and CNOOC lapsed following the expiry of the Sale and Purchase Agreements (SPAs). The expiry of the transaction was a result of being unable to agree all aspects of the tax treatment of the transaction with the Government of Uganda which was a condition precedent to completing the SPAs.
“While Tullow’s capital gains tax position had been agreed, as announced in the Group’s 2018 Full Year Results, the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the transfer of capital allowances related to the consideration to be paid by Total and CNOOC as buyers,” it says in a statement.
Since the deal lapsed, Total has also suspended work on the East Africa Crude Oil Pipeline (EACOP) project, it says.
Kenya
On August 26, 2019, East Africa’s first ever export of oil, a cargo of 240,000 barrels, was flagged off from the port of Mombasa by President Uhuru Kenyatta.This was the first lifting of oil from the Early Oil Pilot Scheme (EOPS) to the international market. The EOPS production of 2,000 bopd continues with oil being transported by road from Lokichar to Mombasa.
“Following the signing of the commercial Heads of Terms with the Government of Kenya in June 2019, Project Oil Kenya continues to make good progress. The upstream and midstream Engineering, Procurement and Construction (EPC) tenders are expected to be issued to the market by the end of 2019. Well tender activities are on track, with bids received and evaluations ongoing. The midstream Environmental and Social Impact Assessment (ESIA) has been submitted to the National Environment Management Authority (NEMA) with approval expected in the first quarter of 2020. Consultations for the upstream ESIA are ongoing, ahead of the ESIA being shared with NEMA before the end of the year,” the company says.
It says the government of Kenya continues to provide strong support on land acquisition, and the National Lands Commission has now completed over 75 percent of the midstream land surveys and valuations. This work is now complete in four out of six counties affected. A draft framework agreement for use of water from the Turkwel Dam has been prepared and is currently being negotiated.
“The Joint Venture Partners and the Government of Kenya are set to commence discussions with prospective lenders for the project financing of the export pipeline that will run from Turkana to the new Lamu Port at Manda Bay. The FID for Project Oil Kenya continues to be targeted in the second half of 2020.” It says.
The Group will publish a Trading Statement and Operational Update on 15 January 2020 and Full Year Results for 2019 will be announced on 12 February 2020.
Trading update summary
· Full year 2019 West Africa net oil production from Ghana and non-operated portfolio forecast to average c.87,000 bopd
· Full year capex forecast of c.$540 million, free cash flow forecast of c.$350 million, full year net debt of c.$2.8 billion
· Uganda farm-down lapsed; Tullow and Joint Venture Partners remain committed to the Lake Albert Development
· Kenya exports East Africa’s first cargo of 240,000 barrels of oil from Mombasa
· Good progress on Project Oil Kenya; targeting Final Investment Decision (FID) late 2020
· Guyana exploration programme delivers two Tertiary oil discoveries; Carapa well underway targeting Cretaceous play
· 3D seismic survey completed in the Comoros; preparations underway for exploration well in Peru in the first quarter of 2020
Operational update – Group production
Full year 2019 Group oil production, including production-equivalent insurance payments, is forecast to average around 87,000 bops. This is slightly below guidance primarily due to Ghana production performance as detailed below.
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