Total's Uganda Expansion 'Significantly De-risks' Project Sanction

Total S.A’s decision to increase its stake in Uganda’s Lake Albert oil development significantly de-risks the project’s sanctioning, analysts at investment bank Jefferies said.

With Tullow Oil plc agreeing to transfer 21.57% of its 33.33% interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total, for a total consideration of $900 million, partner funding issues have been removed, oil and gas analysts at Jefferies highlighted.

Tullow expects the Lake Albert development project to achieve around 230,000 barrels of oil per day when it reaches plateau. Development plans were approved by the Government in August 2016.

Following the announcement of the deal, Jefferies kept its ‘underperform’ rating of Tullow but conceded that a retained, 10 percent, fully carried stake in a 230,000 bpd project “is no small matter,” in a research note sent to Rigzone.

“[The] agreement will allow the Lake Albert Development to move ahead swiftly, increasing the likelihood of FID [Final Investment Decision] in 2017 and first oil by the end of 2020,” Aidan Heavey, Tullow’s chief executive officer, said.

“I am particularly pleased that Tullow’s long-term commitment to, and presence in, Uganda is guaranteed by this transaction and that we will remain an active investor in Uganda’s oil and gas sector. The deal will secure future cash flow for the group from one of the industry’s few truly low cost development projects without any additional cash requirements expected,” he added.