This archive report was first published on 8 October 2019.
Uganda's oil project has hit a roadblock, with Total suspending all technical operations on the East African Crude Oil Pipeline. The move comes days after Tullow Oil Uganda announced it had terminated a sale agreement to trade 21.6% of its shares to joint venture partners Total and China National Offshore Oil Company.
According to Pierre Jessua, Total's General Manager, the company has resumed the development of engineering design of the upstream activities and has been working extensively on the East African Crude Oil Pipeline since selecting the Tanzania route.
However, Jessua notes that Total has been meeting all expenditures for EACOP activities alone, but lacks the legal and contractual framework for the project to progress further. This includes purchasing land for the pipeline company, which cannot be done without a properly registered corporation of shareholders.
When asked if the move sounded like abandoning the project, Jessua clarified that it does not mean Total is leaving the country or stopping the project. Instead, the company is being 'very careful in managing our shareholders' funds.'
The Tullow deal's termination has left the shareholder configuration back to 33.3% each for Total, CNOOC, and the government. Jessua notes that it is premature to speculate on next steps, but the parties will need to sit together and discuss before making any decisions.
When questioned about accusations of blackmail, Jessua denied the claims, stating that Total values conducting business without creating pressure or confrontation.
The Host Government Agreement has been ongoing since 2017, with Total submitting documents, including a proposed Transportation Agreement and Shareholders Agreement, to the Uganda authorities in May. However, the government has a position, and there are still outstanding issues that need to be resolved.
Regarding a tax disagreement, Jessua notes that it is for Tullow to decide how to finance its shares, but Total has rights of pre-emption and will be looking at any proposals.
With a $3.5 billion investment at stake, the suspended operations have put millions of dollars in engineering work on hold. Jessua remains optimistic, stating that the parties will find solutions to the challenges facing the project.
