Oil prospecting giant in Uganda, Tullow Oil plc (Tullow) has announced that they have solved the long standing tax dispute with the government of Uganda that had put their oil development plans in Uganda on hold.
The UK based Oil Company said in a statement on Tuesday that it has today signed a Memorandum of Understanding with the Government of Uganda to resolve the tax dispute and provide for further development of Uganda’s oil resources.
oil drilling in western Uganda
Tullow the leading oil prospecting company in Uganda has confirmed commercially viable oil deposits in Uganda’s mid western Albertine rift basin, and oil production is being planned. However, the government of Uganda refused to grant them a production license following the failure by Heritage Oil and gas to pay a disputed capital gains tax after Tullow oil purchased its interests in Uganda.
This agreement, Tullow says will enable Tullow, CNOOC (China National Offshore Oil Corporation and France’s Total to proceed with the albertine basin-wide development with the full support and commitment of the Uganda government.
Though it is not clear whether Tullow has agreed to pay the 30% of the US$1.5 billion Heritage got for its Uganda assets as the government of Uganda wanted in tax, the statement from Tullow says the agreement will lead to the “resolution of the impasse created by the Heritage and Tullow tax situations”.
The government of Uganda has agreed to extend Tullow’s license for Exploration Area 1 and parts of 3A, in recognition of the fact that time has been lost and to support the development of the Kingfisher oil field.
But the government maintained its earlier condition that its consent granted for Tullow’s purchase of Heritage’s interests in the Lake Albert Basin should see Tullow immediately selling some of its interests to CNOOC and Total to avoid a monopoly situation in Uganda’s nascent oil industry.
In fact, the MoU is conditional upon the signing of Sale and Purchase Agreements (SPAs) between Tullow, CNOOC and Total within 10 working days from Tuesday march 15th 2011.
“Tullow expects that the SPAs will be signed within the specified period. Tullow considers the signing of the MoU to be a huge achievement and looks forward to working closely with the GoU over the coming years, in conjunction with CNOOC and Total, in developing the Ugandan oil and gas sector,” the statement says.
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