Ugandans have come out to support the government’s move of signing ofthe Host Government Agreement (HGA) for the East Africa Crude Oil Pipeline (EACOP) project with Total.
The ceremony took place yesterday at State House Entebbe and was presided over by President Yoweri Museveni, and witnessed by Patrick Pouyanne, the Chairman and Chief Executive Officer of Total.
The Minister of Energy and Mineral Development, Mary-Gorett Kitutu, signed on behalf of Uganda while Nicolas Terraz, the Total Exploration and Production President for Africa, signed on behalf of his employer.
The Signing of the HGA signifies that the oil companies (represented by Total) and the Ugandan government have reached agreement on the commercial framework for the Lake Albert Development Project.
It also represents significant progress towards achieving the Final Investment Decision which is expected by the end of this year.
Patrick Bitature, Founder & Chairman Simba Group is proud of Uganda crossing such a major milestone as the country moves towards commercial oil production.
He says: “I am glad we have crossed a major milestone as a country. I cannot emphasis enough the importance of a Host country Agreement. That gives Total a home now. Its like citizenship for lack of a better simple word. It outlines the important privileges that they become entitled to that are now legally binding. We are much closer to FID final investment decision. An all-important glass barrier without which financial commitments cannot be made. Once made they are more or less cast in stone. The parties have to honour their commitments. Progress at last. The breakdown in trust between the different parties has cost Uganda so much in terms of time, value and lost opportunity. Procrastination and posturing is a Sin.
Emmanuel Mugarura, Chief Executive Officer Association of Uganda Oil and Gas Service Providers (AUGOS) congratulates the Ugandan government for reaching such an important step.
He says: “I would like to congratulate the government and Total upon this important milestone. We’re now a step closer to the FID and we’re excited by this development. The signing is an important step towards the realisation of the project. As service providers, it means a lot to us. We need to continue preparing our teams, our premises, our equipment and machinery as well as our systems in order to ready ourselves for the next step in the project. We hope that there won’t be any more delays to the project.”
On his part, Denis Kakembo, Managing Partner, Cristal Advocates (Oil & Gas Lawyer) says government and the oil companies involved should be commended for working hard to reach a win-win situation.
He says: “The government of Uganda and Total that represented Tullow Oil and CNOOC should be commended for their hard work and compromises made in the last one year to reach a win-win oil deal. At this time last year, these parties were deadlocked. They however both reconsidered their earlier positions resulting in the agreement signed yesterday.
“News that the contentious issues which had obstructed the path to the oil Final Investment Decision (“FID”) have been resolved could not have come at a better time as businesses weather the devastating economic impact of the coronavirus pandemic. Many businesses had staked their growth on the development of Uganda’s oil resources and yesterday’s agreement is the strongest indication yet that FID is imminent.
“Though it is possible to reach FID before this year ends, the second half of 2021 is the more realistic timeline. The key pipeline agreement with Tanzania is yet to be concluded and there are other outstanding commercial agreements between the oil companies and the Uganda National Oil Company. The main contracts for project facilities construction and development are also yet to be awarded.
“FID will unlock up to $ 20 billion in investments in the first 3 years of Uganda’s oil project development even before first oil flows. This will be transformative considering that Uganda’s gross domestic product is $ 30 Billion. As FID is awaited, this is the time for both international and local businesses that have been interested to participate in Uganda’s oil opportunities to reposition once again for the several economic opportunities that will shortly be unlocked.”
Oil funds
Speaking shortly after the signing ceremony, President Museveni said Uganda is a very peaceful and attractive investment destination.
He said proceeds from oil will be used to further develop the country’s other important sectors like infrastructure, education and health.
“Our oil will be used to develop our infrastructure, and ICT to enhance durable capacity of our country,” President Museveni said.
“I am glad that Total and other companies licenced in the country are taking bold steps to quickly commence the production of petroleum,” President Museveni said.
Irene Mwoyogwona: Beyond the Numbers – How Pride Bank's Award-Winning CFO Combines Profitability and Social ImpactThe President reassured Total of the government’s support during their work.
“It has taken long, but it was a deliberate move, I can assure you Ugandans,” said the President, adding that Uganda is a rich country with oil as a small fraction of this natural wealth.
He pointed out that other potential lies in Agriculture, Tourism, Services, and Human Resource among others.
The President promised to get in touch with his Tanzanian counterpart, John Pombe Magufuli, to resolve other pending issues, especially concluding the Host Government Agreement in Tanzania.
“I congratulate Total and our Ugandan team on this milestone. We have been slow but steady and sure,” the President said.
Minister Kitutu said once the final investment decision is made by the oil companies, the opportunities for investment in the country will grow exponentially and give a boost to the economy.
She later said local companies should take advantage of this agreement to tap into opportunities in the oil sector.
Total CEO Pouyanne said this is a great achievement between the Total and the Government of Uganda.
“It was a bumpy road but I am glad we have overcome the challenges. I thank the teams from both sides that have worked tirelessly,” he said.
He commended President Museveni for his leadership and promised that the project would be executed successfully.
Today’s ceremony follows a series of high-level discussions between President Museveni and Mr. Pouyanne which were aimed at addressing the commercial bottlenecks in the achievement of a Final Investment Decision (FID) for Uganda’s upstream and EACOP projects.
The function was attended by among others the Attorney General, Mr. William Byaruhanga.
Also Signed:
The government and Total also agreed on the following agreements in relation to the Uganda National Oil Company:
1. The Deed of Assignment in Relation to the Block 1, 2 and 3A Production Sharing Agreements
2. The Deed of Novation and Amendment with the Uganda National Oil Company in relation to the Joint Operating Agreement in respect of Exploration Areas 1, 2 and 3A
