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Total Suspends Planned $3.5 billion Uganda-Tanzania Oil Pipe

Total SA has suspended its planned $3.5 billion crude export pipeline from Uganda to Tanzania after the collapse of a deal to buy a stake in Tullow Oil Plc’s oil fields in Uganda.

By Fred Ojambo and Paul Burkhardt

The French oil major has terminated all activities related to the 1,445-kilometer (898-mile) conduit from its crude fields in Uganda to Tanga in Tanzania because shared ownership in the project was to be determined upon the completion of the Tullow deal, an official familiar with the project at Total’s Ugandan office said.

Last week, Tullow Oil was forced to abandon plans to sell a stake in its Ugandan project to Total and China’s Cnooc Ltd. and restart the process from scratch after tax negotiations stymied the deal. The termination of the agreement was a blow to Tullow, which had sought partners to help it develop about 1.5 billion barrels of recoverable oil in its Ugandan fields.

After Tullow discovered oil in landlocked Uganda in 2006, the country made ambitious plans to construct a 216,000-barrel-a-day pipeline and a refinery. Its anticipated time line for delivering first oil from the project was adjusted multiple times. A recent government estimate stated that it would come online in 2022. A final investment decision on the project was targeted for the end of this year.

The project’s partners and Uganda’s government will have to come up with a “sensible new target” to give it the green light, Tullow Chief Executive Officer Paul McDade said after the company announced it planned to scrap the stake sale.

Total E&P Uganda, which was leading the pipeline project, dismissed employees who were set to undertake works on it, the official said. The explorer was involved in initial land acquisition in both countries, the official said.

Cnooc Uganda Ltd., which is jointly developing the country’s crude finds, suspended at least 12 employees following delays on the project, a company official familiar with the matter said by phone without providing further details.