Halima Abdallah spoke with Total’s General Manager Pierre Jessua, about the woes facing Uganda’s oil project whose joint venture partners Kampala has accused of blackmail.
Total suspended all technical operations on the East African Crude Oil Pipeline days after Tullow Oil Uganda announced in August it had terminated a sale agreement to trade 21.6 per cent of its shares to joint venture partners [Total and China National Offshore Oil Company]. What are you currently working on?
We have resumed the development of engineering design of the upstream activities. We have also been working extensively on the East African Crude Oil Pipeline since we selected the Tanzania route.
We have completed the engineering, land surveys and developed a register to identify land owners. We have called for tenders on the upstream and mid-stream activities.
Total has been meeting all the expenditures for EACOP activities alone, but we do not currently have the legal and contractual framework for the project to progress further.
For example, we need to purchase the land for the pipeline company but we cannot do so because we do not have a corporation of shareholders properly registered to conduct such activities.
We have been at the frontline, but we can no longer progress. We have not yet reached all agreements with authorities regarding the pipeline and we have not finalised agreements for the upstream, so we cannot keep technical teams idle. We decided to suspend technical activities because we must be disciplined regarding our expenditures.
This sounds like you are about to abandon the project...
No, it does not mean that we are leaving the country or stopping the project. We just have to be very careful in managing our shareholders’ funds. The contractual business and legal activities are still progressing, but we have suspended technical activities.
What are the possibilities we are looking at?
It is premature to say anything with certainty. The Tullow deal is terminated meaning we are back into a shareholder configuration where each of us owns 33.3 per cent. We need to sit together first as partners and discuss next steps before we speculate because anything can happen.
Are you blackmailing government?
We are not blackmailing anyone. Total company values in conducting business do not allow the creation of any kind of pressure or confrontation.
We are a responsible private company minding how we spend our money. At this time of the project, we cannot continue to spend money when there are no visible outputs. However, this is not intended to create pressure on our partners.
What is the progress on Host Government Agreement?
HGA has been going on since 2017. In May this year, we submitted documents including a proposed Transportation Agreement and Shareholders Agreement to the Uganda authorities.
The government has a position and there are still outstanding issues which we need to resolve. We need also to understand what the shareholdings will be in order to be able to fully conclude these issues.
In view of a tax disagreement, will Total buy in Tullow’s shares once a new buyer has been found?
That is for Tullow to decide—they will define a way of financing. They may come back to us with a proposal. According to the partnership, we have rights of pre-emption. We will be looking at what is being proposed and then we will decide.
What happens in the event that Tullow fails to get a taker of its shares because of the tax dilemma?
There is a common interest by Tullow, CNOOC, Total and the government to develop this project: To find solutions. If the problem is financing, we shall sit and discuss.
Let us say that there will be issues shared between all the parties and I trust that when we have a common goal, there will always be a resolution. How long it is going to take is another issue.
President Museveni thinks you are asking for too many incentives
I want to stress that we are not asking for concessions. What we are asking for is the application of the spirit under the PSA. Our interpretation was not to getting an additional benefit. It was to avoid tax on our investment which is a principle we must adhere to.
We hope to discuss this with the authorities to understand what happened so that should a similar situation happen in the future, we are not caught by surprise. It is good to understand what happened to be more efficient next time.
How much is at stake in terms of money to contractors?
We were still doing paper work and have issued tenders. But if you want me to assess the value of what we have suspended then they it is in the range of millions of dollars in engineering only, but the overall investment once we have taken a Final Investment Decision is $3.5 billion.