Patrick Pouyanne, the CEO of Total, a company worth more than $100 billion, is expected in Uganda today, September 11, for the first time since his private meeting with President Yoweri Museveni at State House, Entebbe, in November 2019.
He comes at the tail end of negotiations between the oil companies and the government of Uganda, which have been ongoing since May.
Both the oil companies – France’s Total E&P and China’s Cnooc - are looking to conclude the negotiations and move towards signing the Host Agreement, which will govern the construction and operation of the crude oil pipeline from Hoima to Tanzania. Total E&P is leading the process of having the pipeline constructed.
Most of the contentious issues being negotiated have been agreed upon, according to credible sources. The negotiations touched on a broad range of issues, ranging from the law that will govern the pipeline, land rights, the composition of the shareholding, tariffs, right down to security of the project.
The oil companies wish to sign a nearly $3.5 billion final investment decision (FID) for the crude oil pipeline by December 2020, although it is unlikely they will beat that target as a lot of paper needs to be concluded. Industry observers believe the reasonable time for the signing of FID is in the second half of 2021.
Nothing has been quite critical in these negotiations like the legal regime that will govern the 1,445km crude oil pipeline. Both the government and the oil companies agree that the current legislation is not robust enough to govern the crude oil pipeline. Uganda already has the oil upstream and midstream laws in place. The oil companies want another definitive law.
The oil companies are also keen on having a stabilization clause in the new legislation. The stabilization clause protects the oil companies from the risk of a fundamental change in law that could hurt their business.
Total E&P Uganda is in the process of completing the acquisition of Tullow Oil’s entire stake in Uganda. The transaction is awaiting regulatory approval from the government of Uganda. A couple of issues need to be decided, especially the treatment of the tax element on the transaction.