Tullow Oil PLC has entered into a substantial farm- down of 21.57 per cent of its 33.33 per cent shares in the Exploration Areas in all the Lake Albert Project licenses in EA1, EA1A, EA2 and EA3A to Total E&P Uganda B.V.
The London-based company yesterday announced that a Sale and Purchase Agreement with an effective date of January, 1st, 2017 will allow Tullow retain an 11.76% interest in the upstream and which would reduce to 10% when the Government of Uganda formally exercises its right to back-in.
“This agreement is based on the transfer of licence interests from Tullow to Total in exchange for cash and deferred consideration to be paid as, and when the Lake Albert Development Project reaches a series of key milestones, and represents a reimbursement by Total of a portion of the Tullow’s past exploration and development costs,” partly reads the press statement from Tullow. According to a press statement issued by Total E&P, this transaction will give Total a 54.9% interest, strengthening its position in this competitive project and paving the way for a project sanction in the near future.
“Following the agreement on the Tanzanian export pipeline route, this transaction gives Total a leadership position to move this project efficiently toward FID in the current attractive cost environment, while providing strong alignment and a pragmatic financing scheme for our partner Tullow,” said Patrick Pouyanné, Total Chairman and CEO adding that the increased share in the Lake Albert project will bring significant value to Total and fits with our strategy of acquiring resources for less than $3 per barrel with upside potential.
Aiden Heavey, Tullow Oil Plc Chief Executive Officer (CEO), said the company will remain an active player in Uganda, “Today’s agreement will allow the Lake Albert Development to move ahead swiftly, increasing the likelihood of Final Investment Decision (FID) in 2017 and first oil by the end of 2020. I’m particularly pleased that Tullow’s long-term commitment to and presence in Ugandan is guaranteed by this transaction and that we will remain an active investor in Uganda’s oil and gas sector,”
He added, “The deal will secure future cash flow for the group from one of the industry’s few truly low cost development projects without any additional cash requirements expected. We will work closely with the government of Uganda, its associated agencies and with Total and CNOOC to move this transaction forward as smoothly as possible over the coming months.”
The farm down is likely to raise once again tax disputes. Of recent, such disposals have attracted Capital Gains Tax (CGT) which has been a center of oil litigations between government and the International Oil Companies.
Both companies strongly assert that completion of farm dawn is subject to approval from government of Uganda.
“Once this transaction is completed, Tullow will cease to be an operator in Uganda but will retain a presence in-country to manage its non-operated position,” the press statement notes.
The Lake Albert Development Project is a major development which expects to achieve around 230,000 barrels per day at peak/plateau production.
Report by Edward Ssekika
Stephen Wafula is a happy gold miner in Nakudi village, Banda Sub County, Namayingo district. The 27-year-old, father of 2 children, says, he switched from agriculture to gold mining last year, after witnessing his colleagues ‘prosper’ from mining. “Unlike farming, there is some money in gold mining. I don’t wait for a season, I earn per day,” he narrates, though hesitant to reveal how much he has earned from gold mining.
Byakatunda Katib who also mines in the same area, says they can earn as much as 20 Million shillings ($5,500) a week from Gold mining, if the season is good.
Like other artisanal miners, the use of rudimentary tools like hoes and spades are used in this area to dig deep underground and extract ore with traces of gold. After extracting the ore (soil containing gold) from the ground, the miners normally have two options; to dry, crush, wash and extract the gold or sell the iron ore to other people who can wash it and extract gold for themselves. Either way, the ore is sun dried and then put into a grinder and grounded into fine soil that is then mixed with water and mercury to attract gold dust (particles).
“Without mercury, it is difficult to extract gold particles because we do not have proper mechanization,” Wafula explains. He adds that after extracting gold, the remaining ‘soil’ containing mercury is disposed of in the open ground or sold for further processing using cyanide.
The use of mercury and cyanide is common in all gold mining area like Busia, Mubende, Moroto and Buhweju among others. These hazardous chemicals are mainly used to attract gold particles from the iron ore.
Mercury is a thick, waxy silver chemical that is used in the extraction of secondary gold. This chemical is used to purify gold from ore in a process called amalgamation. During this process, the vapour from the amalgamation (burning of gold particles mixed with mercury) is inhaled by the miner who often does not have protective clothing.
Many miners like Wafula are not aware of the risks of using mercury. Furthermore, they do not have proper healthy and safety gears for protection.
In the latest value for money audit report into the mineral’s sector, the Auditor General, recommends that government should slap a total ban on the use of mercury in gold mining due to health and environmental consequences. The report covers the period between 2011 to 2015.
“The use of mercury and cyanide in gold recovery is a health hazard and should be discouraged else safety precautions should be taken. There is bound to be serious environmental impacts and health issues related to pollution of streams and rivers of Mubende. According to the report, the tailings containing mercury is disposed of in the open, and when it rains mercury finds itself in water streams where the local people fetch water for domestic purposes.
It takes more than 5 years for mercury to completely dissolve into the soil, while it takes 10 years for Cyanide to dissolve into the soil. The Auditor General findings are similar to the Directorate of Geological Survey and Mines (DGSM) internal inspection report that also noted illegal mining and ‘harmful mining practices’.
According to the DGSM internal inspection report for June and July this year, the inspection team visited several artisanal mining sites where people were using mercury to recover the gold and the remaining tailings are then washed with cyanide in a makeshift processing plant which is a threat to the environment.
In Namayingo district, the inspection report notes that there is a company known as Lujiji Processing Company that has installed a gold procession plant and uses Cyanide to extract gold from tailings left behind by the artisanal miners who are also using mercury to recover the gold.
“The gold processing operations of Lujiji Processing Company should be halted until an Environmental Impact Assessment (EIA) process is finalized and approved by NEMA,” the report recommends.
According to Oguttu Bonventeur Stephen, LC3 Chairperson Banda sub-county, the mercury being used in the mining sites are imported from Kenya through Busia and even as far as from Tanzania. He blames the porous borders and lack of enforcement on the use of the harzadous chemical.
“This mercury is being used a lot here. In a day, I am told they can use about 15-20 kgs of mercury and all that ends up in our water streams,” he told Oil in Uganda during a meeting.
Oil in Uganda has also established that artisanal miners in the mines buys 1 gram of mercury at 600 Uganda shilling at whole sale price and 1000 shillings at retail price.
Emmanuel Kibirige, general secretary, Singo Artisanal Gold Miners Association and a gold miner at Kitumbi, Mubende district, argues that the problem is improper disposal of tailings. He concurs with Auditor General Report, that when it rains, mercury is washed away and end up in streams and water sources.
“The problem is not mercury itself, but its improper disposal. It is disposed of anyhow. I think, we need to find a place, where we can dispose the mud containing mercury, and then treat,” he explains. However, he explains that many miners continue to use mercury without wearing any protective gear. “People here don’t use gloves, they use their bare hands and feet, yet there is mercury,” he said.
During an impromptu visit to some of the mining sites in Bugiri and Namayingo districts respectively, Oil in Uganda also found out that there was limited knowledge on the dangers of mercury and cyanide use.
At Byewunyisa Gold Mining Company in Budhaya Sub-county, the miners had removed their gumboots and were handling the tailings with bare hands, despite the fact that they had just used cyanide to get the gold particles.
The story is not any different from situation at Nsango B mining site where children are engaged in washing crushed iron ore with mercury. Recently, Dr. Tom Okurut, the executive director, National Environment Management Authority (Nema) revealed the use of mercury by miners exposes them to contract diseases like lung and kidney problems.
MINING POLICE The inspection report observes that miners have been sensitized against the use of mercury and environmentally friendly mining, there is very little change and recommends stringent enforcement mechanism. “Government should increase security in all gold rush areas including the establishment of Mining Police to enforce compliance,” the internal report recommends.
Of recently, the government has established units in police to hand specific tasks. For instance, there is the oil and gas protection unit and environment protection unit among others, and therefore the ministry wants a specific unit for mining to enforce compliance with good mining practices.
Report by Edward Ssekika and Collins Hinamundi. Additional information by Beatrice Ongode.
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