Govt, oil companies in assets inspection ahead of signing deal

OIL & GAS   INFRASTRUCTURE

As Tullow prepares to handover its Ugandan resources to French oil giant Total, the Government has started inspecting the areas where the London listed firm has been operating to establish if it complied with the social and environmental obligations.

Uganda is inspecting the sites to establish if the environmental restoration processes were properly followed before Tullow can hand over its assets to Total. The company explored for oil and set up its infrastructure in areas owned by communities and protected locations. The entire Albertine Graben where it operated together with other companies is one of Africa's biodiversity hotspots. 

New Vision has established that the environmental restoration monitoring inspection exercise started last week following a written notice from Tullow to the energy ministry about the activity. 

The Tullow country manager, Mariam Nampeera, indicated to the ministry that the company would relinquish the sites, especially those located in areas owned by the communities, once the Government is satisfied with their restoration quality. 

These are the sites where the company undertook different activities related to exploration work. They are not oil wells. But the areas with oil wells which are also being inspected will be transferred to Total. 

In April, Tullow announced that it had agreed to sell its entire 33.3% final stake in Uganda to Total for $575m. Total also issued a statement confirming the deal. 

Recently, Tullow announced that its stakeholders had agreed to the deal and the transaction is expected to conclude soon. Uganda has also agreed to take the $14.6m in capital gains taxes arising from the transaction, a figure far much lower than the $167m which had been assessed by the taxman when Tullow was only selling 21.57% of its stake in 2017 for $900m.

The conclusion of the deal is expected to trigger the Final Investment Decision (FID) by Total and Chinese firm, Cnooc, and development of the 6.5b oil resource so far discovered.

The Total chairman and chief executive officer, Patrick Pouyanne, said in April that the transaction would enable the company and Cnooc, move the Uganda Lake Albert development and the Uganda-Tanzania crude pipeline projects forward towards FID. 

"We are pleased to announce that a new agreement has been reached with Tullow to acquire their entire interests in Lake Albert development project for less than $2 per barrel of oil 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," Pouyanne said in the April 23 statement. 

Tullow was the only oil company operating in Uganda until 2012 when it sold its 66.66% stake to Total and Cnooc. It acquired resources that were previously owned by HardMan Resources and Heritage in Uganda.

"The Government is trying to ensure that all the sites and oil wells inherited by Tullow from the companies that were here before Tullow have been well maintained and restored," a source in the energy ministry said. Once this and other related activities are complete, Total and Tullow will sign the final deal. 

The inspection is being conducted by National Environment Management Authority, Petroleum Authority of Uganda (PAU), Tullow and Total. The petroleum authority, in a statement, said Tullow will hand over 25 restored sites to the "original" landowners.

"The sites which were previously used by Tullow Oil for exploration activities are situated in Licence Area 2 (LA-2) of the Albertine Graben in Hoima and Buliisa. The team is tasked with establishing whether they sites pass the test of restoration before they are handed over to the owners and that all the rental fees that have accrued are fully paid to the project affected persons," the authority added.

Some of the sites being inspected are those where oil was found. Others are places where companies hit dry wells. According to the Petroleum Authority of Uganda, the sites located in the community where oil was not found will be returned to the people after confirming that landowners were compensated and requisite rent paid.

The sites where Tullow operated, and did not find oil but are located in protected areas will be handed to Uganda Wild Life Authority (UWA). But these could be explored again by other companies in future exploration rounds. 

The protected areas where Tullow and Total and other companies operated include Murchison National Park, Kabwoya and Bugungu game reserves in Nwoya, Buliisa, Hoima and Kikuube districts. 

Among the sites under inspection are Mputa, Nzizi, Karuka, Ngege, Kasemene, Awaka, and Taitai exploration areas, Mputa and Kyehoro camps, Waraga road borrow pit, Kisinja and Ngara waste consolidation areas. Other areas to be inspected include resettlement areas in areas where people were relocated to from their homes like the refinery project affected people and others displaced by the roads constructed by oil companies in exploration areas.

Isaac Ntujju, the principal environmental inspector at National Environment Management Authority (NEMA) said the Government is interested in finding out if Tullow has met its (environmental) and legal and social obligations. 

However, the watchdog, he added, has been conducting routine environmental inspections in the places where the oil companies have been operating. Some of these sites are areas where the oil company kept exploration waste. 

"But now since Tullow is leaving, it is important that we appraise ourselves about how the company has been complying with its environmental and legal obligations so that we are on the same page," Ntujju stated.

He explained that Tullow has also been submitting quarterly reports detailing its compliance with environmental and social requirements.  "But now that the company is leaving, it is important to know which social and environmental obligations and liabilities are being transferred to the new company," Ntujju added.

The UWA communications manager, Bashil Hangi, said Tullow has "largely been complying" with its environmental obligations. He also stated that the authority would be ready to receive the sites that would not be needed by Total.

"There are sites that Tullow abandoned (no commercial quantities of oil found) and they are the ones we will be receiving. We will not be receiving active sites because those will be transferred to Total," Hangi said. 

Uganda expects the oil companies to reach FID before the end of the year to trigger investment of between $15b and $20b in the development phase of the industry.