Tullow Oil Plc’s long-delayed $2.9 billion deal to sell one-third stakes in three Ugandan exploration areas to Total SA and China’s CNOOC Ltd can finally go ahead after the U.K. firm signed a joint oil production-sharing agreement with the East African nation.
The deal is expected to ultimately unlock $10 billion worth of investments–including Uganda’s first refinery and a pipeline to the Indian Ocean–in the country’s nascent oil sector that Ugandan geologists suggest could contain as much as 6 billion barrels of oil.
Uganda is expected to start oil production in the next couple of years and output could hit as much as 350,000 barrels of oil day by 2018.
Government and company officials said Friday the sales deal is expected to be completed in the “next few days.”
The deal, agreed early last year, has been dogged by snags ranging from tax disputes to disagreements over oil production plans.
Shares in the London-listed explorer briefly rose on the news as investors signalled their approval and relief, but by midday they had retraced somewhat from their early gains. At 1201 GMT, Tullow shares were up 13 pence, or 0.9%, at 1453p.
With Friday’s signing of the production sharing agreement paving the way for the stake sales to conclude, Tullow can at last turn its attention to developing Uganda as an oil and gas province, said analyst Anish Kapadia of Tudor Pickering Holt.
“This will further ease Tullow’s balance sheet and gives them the go-ahead to finally start producing from the basin,” Kapadia said.
Total and Cnooc weren’t immediately available for comment. Ugandan government officials couldn’t be reached for an immediate comment.
