Uganda affirms its intention to become a major player in oil and gas. This will automatically catapult Uganda into the largest crude oil producer in East Africa, and provide much-needed income for development and creation
NAIROBI, Kenya, 23 April 2020/ — President Museveni, and the Ceos of Tullow Oil and Totel, could not have chosen a better time to announce their agreement to resolve a long-standing capital gains tax dispute that had previously prevented Tullow Oil from licensing Lake Albert to Total.
Tullow Oil, a junior oil company, announced that it had agreed to sell all of its stake in the Lake Albert development project in Uganda to Total’s main oil company for $575 million. This is good news for both companies, Uganda and the oil industry around the world and in Africa in particular, all of which are going through a period of distress in the face of Covid-19 and falling oil prices.
This will automatically catapult Uganda into the largest crude oil producer in East Africa, and provide much-needed income for development and creation. The World Bank’s current estimates expect Uganda to record annual growth rates of more than 10% resulting from oil production and related activities. This agreement shows a lot of foresight to make an acquisition of this nature at such an incredible but reasonable price. The dispute settlement that paved the way for this agreement must be welcomed. President Museveni, Tullow Oil and Total understood that being proactive and making concessions is good for Uganda, jobs, contracts for residents and regional growth,” said NJ Ayuk, President of the African Chamber of Energy.
More importantly, the agreement sends the right signals to the market and investors that despite the current challenges, Uganda is open and ready to do business. In line with the African Chamber of Energy’s call on governments to be flexible in assessing existing projects in the current business environment, the Government of Uganda, with the direct participation of President H.E. Yoweri Kaguta Museveni, was willing to cede ground and conclude the agreement. This is good for Uganda and an example for other African countries facing the oil crisis to followIt is likely to have positive effects well beyond the current crisis, with more and more explorers and oil companies likely to review Uganda’s licenses in an attempt to replicate the successes of Tullow Oil’s discoveries.
The agreement is also a huge boost to the construction of a pipeline that will transport crude to international markets. “The Uganda/Tanzania pipeline project itself will not only create additional jobs, but will also make the entire country viable as a major oil border. This is a big win for the local and regional oil and gas industry and propels the East African region to play a role in helping the energy sector rebound,” said Elizabeth Rogo. President of the African Chamber of Energy for East Africa.
We’ll probably see other oil companies like Oranto Petroleum drilling additional exploration wells in adjacent blocks to take advantage of the pipeline infrastructure. The pipeline also increases the attractiveness of oil blocks in southern South Sudan, a neighbouring oil producer.The potential discoveries there are now likely to reach a lower neutral point, due to the reduction of channelling costs via Uganda.
While acknowledging the Ugandan government’s willingness to compromise on this particular tax dispute, allowing this revolutionary transaction.The African Chamber of Energy continues to advocate for additional special measures that will facilitate a final investment decision by Total and its partners, and the deployment of capital for other drilling and geophysical projects in Uganda in the current business climate. We urge the government to continue to work with industry to improve the business climate to increase investment in oil and gas.
Source : AfricainInfo / Par APO