1. Introduction
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 US$ 10 billion and US$ 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.
This article gives an update of Uganda’s recent oil and gas developments as well as examining when FID is likely to happen.
2. Disappointing 2019
2019 turned out to be a disappointing year 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 29th August 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 9th January 2017 with Total poised to acquire 21.57% out of Tullow’s 33.33% interest in the Lake Albert oil blocks.CNOOC exercised its right to pre-empt 50% of the transaction. As a result, Total and CNOOC would each increase their stake to 44.1% while Tullow would keep 11.8%.The statement issued by Total at this link highlighted that since 2017, all the concerned parties had been actively progressing the SPA. However, despite extensive discussions with the authorities, no agreement on the fiscal treatment of the transaction had […]
