Tullow Files Suit Against Uganda -Confusion on Uganda’s Block 4B

Tullow Files Suit Against Uganda

Tullow Files Suit Against Uganda

For those who hoped that once Uganda passed its upstream oil industry bill there would be no more contractual angst to be reported on out of the country are doomed for disappointment. Tullow Oil, the country’s most successful explorer has filed a new tax dispute in the US against the Ugandan government over levies imposed on machinery it imports for oil exploration, a company official said according to a Dow Jones Newswire report.

The Irish independent filed with World Bank-affiliated International Center for Settlement of Investment Disputes, said Jimmy Mugerwa, Tullow’s general manager in Uganda. Tullow is challenging the Ugandan government’s decision to levy an 18% value-added tax on of its imported machinery as well as other supplies into the country, he said.

A government official, who declined to be named said, “The position of the government is that Tullow should not claim taxes on supplies as recoverable costs before oil production starts.”

This latest squabble between an oil company and the government could further delay the start-up of oil production in the Lake Albertine rift basin.

Confusion on Uganda’s Block 4B

According to reports out of Uganda, the government has blocked Ophir Energy from taking over Block 4B, picked up by the firm when it acquired Dominion Petroleum.

“We’re aware Dominion Petroleum Uganda’s parent company was acquired by Ophir but we were never notified and neither did we clear the transaction,” Honey Malinga, acting commissioner for the Petroleum Exploration and Production Department, told The Development Analyst.

According to Malinga, Dominion did not follow specific procedure; however, it could be said in Dominion’s defense that oil procedures in Uganda have not been set in stone until recently and in the past it has been unclear exactly what the government’s policy is.

The deal between Ophir and Dominion closed in February, a full ten months prior to the government passing its long delayed petroleum bill.

“Dominion would need to tell us how much they’re selling, then we would have to clear them, taxes on their earnings would have to be paid. All that has not been done,” Malinga said. The issue is similar to the tax dispute between Heritage Oil Corp. and the Ugandan government over its sale of its stakes in the Lake Albertine Basin to Tullow Oil.

The government is currently embroiled in arbitration with Heritage over the disputed $404 million tax bill from the sale of its assets to Tullow Oil in 2010 for $1.45 billion.

There have been conflicting stories over Ophir and Block 4B; one has the company relinquishing the block back to the government and the other has Ophir selling its stake in the block to little known Octant Energy Corp. Octant is a Canadian firm whose management is made up of former senior staff from Black Marlin Energy, an East Africa focused firm that was acquired by Afren.

In H1 it was reported that the company took steps to close its office in Uganda and surrender Block 4B and had submitted an application to relinquish it to the government.

In March of this year Octant reported that it was entering into a LoI to farm-in on Block 4B.

Leave a Reply

Your email address will not be published. Required fields are marked *