Total to buy Tullow’s Uganda licences for $575m

French energy firm Total has brokered a deal to acquire oil and gas exploration firm Tullow’s entire stake in the Lake Albert development project in Uganda for $575m.

The deal also includes the purchase of the East African Crude Oil Pipeline (EACOP).

The transaction is part of Tullow’s portfolio management programme aiming to sell assets valued at $1bn. The company will use the proceeds from the sale to clear its debt.

The oil and gas explorer will receive $500m in cash for the Ugandan prospects and $75m once a final investment decision (FID) is reached on the Lake Albert development project.

Furthermore, Total would make additional payments to Tullow once production starts and the benchmark Brent oil price reaches $62 per barrel.

According to Total, an agreement on a tax issue with the Ugandan authorities has been reached in principle on the tax treatment of the transaction.

Total chairman and CEO Patrick Pouyanné said: “We are pleased to announce that a new agreement has been reached with Tullow to acquire their entire interests in the Lake Albert development project for less than 2$/bbl in line with our strategy of acquiring long-term resources at low cost, and that we have an agreement with the Uganda government on the fiscal framework.

“This acquisition will enable us, together with our partner CNOOC, to now move the project forward toward FID, driving costs down to deliver a robust long-term project.”

Under the agreement, Total will acquire all of Tullow’s existing 33.33% interest in each of the Lake Albert project licenses and the proposed EACOP System.

The transaction is subject to Tullow receiving shareholders’ approval.

Last September, Total suspended all activities on a planned $3.5bn crude export pipeline from Uganda to Tanzania due to uncertainty over its Uganda operation.

In January 2017, Tullow Oil signed a Sale and Purchase Agreement to sell a substantial stake of its assets in the Uganda Lake Albert oil project to Total E&P Uganda.