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As Uganda’s government is looking to resolve a tax dispute with oil majors over oilfields, it sees the development costs for the two fields to reach at least US$5 billion, Uganda’s Energy Ministry Permanent Secretary Robert Kasande told Bloomberg in an interview.
Until recently considered one of the hot spots for new oil developments in Africa, Uganda has pushed first oil to no sooner than 2022, later than a previous target for 2021, because of lack of infrastructure and disagreements over taxes and plans with operators.
Uganda’s government is still negotiating with Tullow Oil, Total and China’s CNOOC—shareholders in the Kingfisher and Tilega oilfields in the Lake Albert region—over Tullow’s intention to cut its stake in the project.
There is no breakthrough in talks yet, the energy ministry secretary Kasande told Bloomberg.
Uganda estimates that the fields would need US$5 billion for the drilling of “over 500 wells” and the construction of two central processing facilities and a water plant, he said.
“In Uganda, Joint Venture conversations with the Government are ongoing. Tullow remains committed to reducing its equity stake in the project ahead of FID,” the company said in its trading update on Wednesday.
In September 2019, reports had it that all activities on the oil pipeline planned to export crude from Uganda had been suspended, following the collapse of a stake acquisition deal in the key Ugandan oil project.
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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.
But Tullow Oil said at the end of August that its agreement to sell part of its stake in the Lake Albert project to Total and 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 warned then that this setback would likely delay the final investment decision on the Uganda pipeline project, initially expected for 2019.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.