Tullow Oil PLC has terminated farm-down agreements with two partners after failing to agree on tax details with the government.
The firm, whose Uganda General Manager Jimmy Mugerwa was this month recalled to the head office in London, United Kingdom, is now looking to sell down its stake in the country.
The farm-down with Total E&P and China National Offshore Oil Corp (CNOOC) will be terminated at the end of Thursday, August 29 after sale and purchase agreements expired.
Previously, the sale and purchase agreements had been extended but on this occasion the inability to agree all aspects of the tax treatment of the deal with the Ugandan government resulted in the termination of the deal.
The Uganda Revenue Authority could not agree with the partners with regards to tax relief for the consideration to be paid by Total and CNOOC as buyers.
“Tullow has worked tirelessly over the last two and a half years to complete this farm down which was structured to re-invest the proceeds in Uganda,” Tullow Chief Executive Paul McDade said.
Following termination, oil and gas exploration firm Tullow will look to reduce its 33 per cent stake in the Lake Albert project. Lake Albert has 1.5 billion barrels of oil in recoverable resources and was expected to produce over 230,000 barrels of oil per day at peak production.
Tullow did not indicate to what extent it planned to sell down its Lake Albert stake.
“Whilst this is a very attractive low-cost development project, we remain committed to reducing our operated equity stake,” McDade added. “It is disappointing to report this news at a time when we are making so much progress elsewhere towards the growth of the group with our recent oil discovery in Guyana and the first export of oil from Kenya.”
Shares in Tullow were 4.1 per cent lower at 208.30 pence in London on Thursday.
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