News and Views

Tullow ‘hits new Uganda impasse’

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Tullow Oil’s proposed $2.9 billion Ugandan asset sell-off looks to have hit yet another snag with a new row reportedly developing with government over contract clauses.

Uganda’s President Yoweri Museveni told reporters in the capital Kampala on Friday that Tullow and other oil giants had objected to the removal of stabilisation clauses in revised production sharing agreements being proposed as part of an asset sale plan, media reports claim.

The companies, including France’s Total and CNOOC of China which are each looking to take up large chunks in three Tullow blocks in Uganda, have also objected to Uganda building a refinery, Museveni claimed further.

“I was ready to authorise (the deal) but some of the oil groups brought new confusion so I did not accept,” Dow Jones quoted the President as saying.

“There were two issues, one was the stabilisation clause [and] the second issue was our desire for a refinery here to refine oil for Uganda and for the region.

“I don’t know whether they have changed their mind because I have not heard from them recently,” he continued, according to the news wire.

Tullow had been hoping to tie-up the sale of a third in each of the three blocks to each of Total and CNOOC this month.

The partnership is expected to unlock a $10 billion investment developing the oil sector into production phase.

The dispute centres on tax claimed by the government on the $1.45 billion Heritage Oil made from the sale of its Ugandan assets to Tullow Oil in 2010.

In November Heritage said it would launch an appeal against a Ugandan tribunal which has ruled the company is liable to pay $404 million in capital gains tax, as part of a year-long row over the tax bill.

Uganda discovered commercial deposits of hydrocarbons in its west along the border with the Democratic Republic of Congo in 2006. Production is expected to start early next year.

Tullow says it has found 1.1 billion confirmed barrels of oil and believes there are 1.4 billion barrels left to find, while a Ugandan energy ministry official says 2.5 billion barrels of oil are confirmed in place, of which between 1 billion to 1.2 billion barrels are recoverable.

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