Tullow Oil has terminated its farm-down agreement with Total and CNOOC in Uganda, following a lack of agreement with government over the tax terms of the transaction, Irish Times reported.
The London-listed Irish explorer said on Thursday that its farm-down is to terminate at the end of the day, August 29th, following the expiry of the sale and purchase agreements (SPAs).
Despite previous extensions to the SPAs having been agreed by all parties, Tullow said it has been unable to secure a further extension of the SPAs with its joint venture partners. This is due to being unable to agree all aspects of the tax treatment of the transaction with the Government of Uganda, which was a condition to completing the SPAs.
Paul McDade, chief executive, said it was “disappointing” to report this news, when it was making “so much progress” elsewhere towards the growth of the group.
“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. Whilst this is a very attractive low-cost development project, we remain committed to reducing our operated equity stake,” he said.
While Tullow’s capital gains tax position had been agreed as per the group’s disclosure in its 2018 accounts, Uganda Revenue Authority could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC as buyers.
As a result, Tullow said it will now initiate a new sales process to reduce its 33.33 per cent operated stake in the Lake Albert project which has over 1.5 billion barrels of discovered recoverable resources and is expected to produce over 230,000 bopd at peak production.