The business community eagerly awaits the final investment decision (FID) which will be a key milestone for Uganda’s oil and gas industry.
FID represents the point at which the international oil companies (IOCs) and the Government of Uganda (GoU) through the Uganda National Oil Company (UNOC) will commit to oil field development.
The project execution phase should commence shortly after FID with significant expenditure on building the production facilities, the crude oil pipeline, refinery and the associated supplies and services. Between $10 billion and $20 billion will be invested in the project in the first three years before the first oil flows.
This is transformative and unprecedented, especially considering that this investment is equivalent to nearly two thirds of Uganda’s gross domestic product.
Local and international investors have been positioning for the economic prospects that the development of Uganda’s oil and gas sector will present. A sizable number of entrepreneurs had actually embarked on investment in anticipation of arising business opportunities but they have had to weather heavy losses as a result of the delays in the sector taking off.
DISAPPOINTING 2019
Year 2019 turned out to be a disappointing one for the business community and other stakeholders who had been optimistic that FID would be made before the year ended.
Instead, tax disputes created a wedge between the IOCs and the GoU, casting doubt on the future of the country’s nascent oil and gas industry.
In news that dominated global business headlines, Total, China National Offshore Oil Corporation (CNOOC) and Tullow allowed the lapse of a sale and purchase agreement (SPA) on August 29, 2019. Under this SPA, Tullow was to divest a significant portion of its stake in Uganda’s oil blocks to CNOOC and Total.
This SPA had been entered into by Total and Tullow on January 9, 2017 with Total poised to acquire 21.57 per cent out of Tullow’s 33.33 per cent interest in the Lake Albert oil blocks. CNOOC exercised its right to pre-empt 50 per cent of the transaction.
As a result, Total and CNOOC would each increase their stake to 44.1 per cent while Tullow would keep 11.8 per cent. However, despite extensive discussions with the authorities, no agreement on the fiscal treatment of the transaction had been reached.The deadline for closing the transaction had been extended several times, clearly demonstrating the endeavors of the parties to find an agreement.Total further announced on September 5, 2019 the suspension of all activities […]
