Total suspends work on $3.5bn Uganda-Tanzania oil pipeline

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

The 1,445km pipeline was planned to pass through neighbouring Tanzania to the Indian Ocean port of Tanga.

The decision follows last week’s termination of the farm-down transaction between Tullow Oil, Total E&P and CNOOC.

All parties have been actively progressing the sale and purchase agreement (SPA) since 2017. However, the companies did not reach an agreement on the fiscal treatment of the transaction despite negotiations with the authorities.

Under the SPA, Total planned to acquire 21.57% out of Tullow’s 33.33% interest in the Lake Albert licences. CNOOC exercised its right to pre-empt 50% of the transaction.

If the deal was successful, Total and CNOOC would have each increased their interest to 44.1% while Tullow would have kept 11.8%.

Total’s interest will, therefore, remain at 33.3% on blocks EA1, EA2 and EA3 prior to the 15% national company back-in. The company is the operator of block EA1, which contains the largest part of the reserves.

The French oil major has the right to pre-empt any future transactions in the event that any party divests part or all of its interest.

An official familiar with the project told Reuters: “All East African Crude Oil Pipeline (EACOP) activities, including tenders, have been suspended until further notice because of the collapse of the deal.

“The collapse has meant uncertainty in terms of who will meet what cost in developing the project, which is meant to have a similar shareholding structure like that of the oilfields.”