Uganda’s Museveni says Tullow asset sale deal deadlocked

January 27, 2012 | Africa, Mergers, Acquisitions & JVs

Uganda_President_Yoweri_Museveni

Uganda said on Friday the proposed sale of stakes by UK-based explorer Tullow Oil in its fields in the east African country to France’s Total and China’s CNOOC had been delayed by disagreements over protective clauses.

Uganda discovered oil in its west along the border with the Democratic Republic of  Congo (DRC) in 2006. Production had been expected to start early this year.

Uganda’s President Yoweri Museveni said there was disagreement over a request by the oil firms to include a clause to stabilise their incomes in case the country’s taxes rose, and also over the issue on building a pipeline to export crude.

Tullow had said on January 16 that it was on track to complete a long-blocked sale of stakes by the end of January.

“I was ready to authorise but some of the oil groups brought new confusion so I did not accept,” Museveni told a news conference in Kampala.

Tullow has found 1.1 billion confirmed barrels of oil and believes there are 1.4 billion barrels left to find, while a Ugandan energy ministry official says 2.5 billion barrels of oil are confirmed in place, of which between 1 billion to 1.2 billion barrels are recoverable.

Museveni said the government had told the companies that Uganda was willing to compensate them in case of  loss resulting from taxation policy adjustments but that a formula to calculate the loss had to be agreed to.

“There were two issues, one was called the stabilization clause which says that in case an oil company loses money in future because of the tax policies of the government… the government must compensate that company.”

Museveni said the second issue was that his government wanted the option of a crude export pipeline considered only at a later stage when production levels could justify it.

“Now, one of the oil companies… said no we must agree now. We said we cannot agree now without calculation … so that’s what we told Total,” Museveni said.

“So those are the issues, I don’t know whether they have changed their mind because I have not heard from them recently.”