Total Uganda to Acquire 54.9 Percent Stake of Tullow’s Lake Albert Oil Project

French oil and gas company Total and the British oil firm Tullow, have entered into a package agreement under which Total will acquire an additional 21.57 percent interest from Tullow in the Uganda Lake Albert oil project. Following this transaction, Total will hold a 54.9 percent interest, strengthening its position in this competitive project and paving the way for a project sanction in the near future, while Tullow on the other hand will be left with 11.8 percent stake.

The increased share in the Lake Albert project will bring substantial value to Total and also fits with their strategy of acquiring resources with significant upside potential at an exploration cost of less than USD 3 per barrel.

Under the terms of the deal, Total will acquire 21.57 percent out of Tullow’s existing 33.33 percent stake in all of the Lake Albert project licenses EA1, EA1A, EA2 and EA3A. Total, which is already operator of licenses EA1 and EA1A, will in addition take over operatorship from Tullow of license EA2, enabling significant efficiency gains and synergies.

Uganda has an estimated 1.7 billion barrels of recoverable oil at fields in the Lake Albert basin that the government expects Tullow, Total and China’s Cnooc to start pumping by 2021. The government] of Uganda has estimated that it will receive USD 43 billion of revenue from the resource over 25-years, as the Lake Albert development will pump about 230,000 barrels a day when it reaches full production. The revenues realized from the exploration will be dedicated to infrastructural developments in terms of electricity, railway development, roads, human resource and scientific innovations.

Uganda’s oil and gas industry will continue to attract investors owing to an 85 percent drilling success rate, enabling policies, legal and institutional frameworks, including the setting up of the Petroleum Authority of Uganda to oversee the whole sector, are all finally in place and the pace for building this infrastructure is expected to pick up this year as the government seems determined to beat the 2020 timeline for starting oil production and building a refinery,  reduced explorations costs due to VAT exemption on exploration equipment, and very low exploration costs of less than a dollar per barrel compared to the world average of USD 5 – USD 25 per barrel owing to the VAT exemptions.

Total has been present in Uganda since 1955 in Marketing and Services with today over 150 service stations across the country and an overall market share of 24 percent. It is present in Upstream oil since 2011 after acquiring from Tullow a 33.33 percent interest in the licenses EA1, EA1-A, EA2, and EA3 covering the Lake Albert Oil discoveries. Total is then approved by the Government of Uganda to operate oil exploration and production activities in licenses EA1 and EA1-A

The East African region happens to be a core growth area for Tullow. In Uganda, the firms’ discovered contingent resources are estimated to be around 1.7 billion barrels of oil while in Kenya, their current estimate of recoverable resources is up to 750 million barrels with further exploration potential supporting an upside of 1 billion barrels. 

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