All activities on an oil pipeline planned to export crude from Uganda have been suspended, following the collapse of a stake acquisition deal in a key Ugandan oil project, an industry official told Reuters.
The East-African Crude Oil Pipeline (EACOP) is planned to be a 1,443-kilometer-long (897 miles) pipeline worth US$3.5 billion and expected to transport oil from Uganda to the Tanga port in Tanzania.
Last week, Tullow Oil said that its agreement to sell part of its stake in the Lake Albert project to France's Total and China's CNOOC had been terminated because "the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC as buyers."
Tullow Oil will start a new sales process to reduce its 33.33-percent operated stake in the project which has more than 1.5 billion barrels of discovered recoverable resources and is expected to produce over 230,000 bopd at peak production.
"The Joint Venture Partners had been targeting a Final Investment Decision for the Uganda development by the end of 2019, but the termination of this transaction is likely to lead to further delay," Tullow said.
"Despite the termination of this agreement, Total together with its partners CNOOC and Tullow will continue to focus all its efforts on progressing the development of the Lake Albert oil resources," Arnaud Breuillac, President Exploration & Production of Total, said.
Uganda expects to start pumping oil in 2022, later than a previous target for 2021, because of lack of infrastructure and disagreements over taxes and plans with operators, Energy Minister Irene Muloni said in February this year.
Uganda is one of the hot spots for oil development in sub-Saharan Africa. A newcomer on the oil scene, the landlocked country has welcomed Tullow Oil, CNOOC, and Total in its oil-rich regions.
Uganda will have to build first a pipeline to export its oil and a refinery before starting oil production, minister Muloni has said.
By Tsvetana Paraskova for Oilprice.com
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