French oil and gas company, Total, will acquire a stake of 21.6 percent from Tullow Oil’s exploration interests in the Lake Albert development in Uganda. The deal is approximately valued at $900 mn. Total will pay an initial $100 mn in cash, with another $100 mn split equally when the project gets sanctioned and it starts pumping oil. The remaining $700 mn will be used by Tullow as deferred consideration to fund its share of the costs. The deal leaves Total with a 54.9 percent stake in the project and Tullow with 11.8 percent.

The increased share in the Lake Albert project will bring substantial value to Total as it fits with its strategy of acquiring resources with significant upside potential at an exploration cost of less than $3 per barrel. Uganda has an estimated 1.7 billion barrels of recoverable oil at fields in the Lake Albert basin. The government expects Tullow, Total and China’s Cnooc to start pumping by 2021.

The Lake Albert development will pump about 230,000 barrels a day when it reaches full production. As such, the government has estimated it will receive $43 bn of revenue from the resource over a 25 year period. The revenues realized from the exploration will be dedicated to infrastructural developments in terms of electricity, railway development, roads, human resource and scientific innovations.

Uganda’s oil and gas industry will continue to attract investors owing to:

• A 85 percent drilling success rate.
• Presence of enabling policies, legal and institutional frameworks, including the setting up of the Petroleum Authority of Uganda to oversee the whole sector.
• Reduced explorations costs due to VAT exemption on exploration equipment.
• Very low exploration costs of less than a dollar per barrel compared to the world average of $5 – $25 per barrel owing to the VAT exemptions.