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Uganda close to deal with Total over terms of Lake Albert oil project

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Uganda close to deal with Total over terms of Lake Albert oil project

Highlights

Oil development on hold over fiscal terms, tax deal

Talks scheduled to concluded this month

Government still hoping to see first oil in 2023

Kampala — Uganda is close to an agreement with France's Total and its partners in the Lake Albert oil project that will solve the stand-off over the country's maiden oil development, according to an upstream commissioner at the ministry of energy.

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Talks aimed at concluding a dispute over capital gains tax and fiscal terms were slated to end by the end of this month and will allow companies to conclude the farm-down deal and prepare for the FID scheduled for April, Frank Mugisha told S&P Global Platts.

"We are very close to reaching a common ground on the remaining issue about cost recovery, we have agreed on the majority of the issues," Mugisha said.

Fresh negotiations were initiated by Total CEO Patric Pouyanne and Uganda's President Yoweri Museveni in November after the first round of talks ended in a deadlock. That led Total to terminate the farm-down deal and freeze activities in Uganda late last year.

In September, Total said it needed a "stable and suitable legal and fiscal framework" to go ahead with the long-delayed oil export development.

The deal involves Tullow Oil selling 21.5% of its stake in the project for $900 million to its partners -- Total and China's CNOOC.

The new wave of talks was hinged on the recoverable costs and tax waivers and their conclusion is vital for oil companies to make their FID and any delay could further delay the FID.

Companies want the farm-down concluded to kick-start the $20 billion oil development. That includes a $3.55 billion crude export pipeline and drilling of over 500 wells to produce 230,000 b/d.

Speaking in early November, Uganda's energy minister, Irene Muloni, said she still hoped to begin producing its first oil from Lake Albert in 2023. She conceded, however, the target could be tough to meet due to the rift over the commercial terms for the project.

Companies, however, are pushing on.

CNOOC said this week it secured an environmental impact assessment certificate from thee state regulator for the Kingfisher field which it operates under the wider Total-led Lake Albert oil development. That followed the last year's clearance by the same authority for the Tilenga field operated by Total.