Uganda Says Standoff With Oil Companies Will Delay Production

By Nicholas Bariyo

KAMPALA Uganda--Continuing lengthy negotiations with investors may push back Uganda's oil production but Kampala remains committed to ensure that it gets "optimal value and benefit from the commercialization of East Africa's largest undeveloped crude assets," Uganda's energy and minerals ministry said Tuesday.

A $900 million failed deal by the U.K.'s Tullow Oil PLC (TLW.LN) to sell its stake in the assets to France's Total SA (FP.FR) and China's Cnooc Ltd. (0883.HK) has stalled some operations, including work on a 900-mile export pipeline, but the government wants to ensure that investors undertake projects that give "a reasonable return on investment," it said.

"The projects that are to be sanctioned for close to three decades and their impact should last beyond their lifecycle for current and future generations," said Robert Kasande, permanent secretary at the ministry.

Tullow announced last month that it would begin a new process to reduce its stake in the 230,000 barrels of oil-a-day project after failing to reach a tax deal with authorities. The standoff has since forced investors to pause some development activities and lay off workers but the government insists that any sale must fulfill Uganda's tax obligations.

Mr. Kasande said that the spat will inevitably affect the final investment decisions for the projects, which were expected in the course of this year. Although the most recent government estimate had hoped that oil production would start by 2022, it is now unlikely. This is the latest hurdle for the future oil producer, which has already pushed back the production timetable multiple times.

"The government will continue to engage and support the oil companies to resume and continue with activities on all the projects together with all stakeholders to find optimal and lasting solutions, "Mr. Kasande said.

Company officials could not offer an immediate comment.

Write to Nicholas Bariyo at [e-mail]

(END) Dow Jones Newswires

October 01, 2019 07:14 ET (11:14 GMT)

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