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Uganda Delays Tullow Oil Asset Sale

Source: Reuters 10/11/2011, Location: Africa

Uganda's parliament voted to delay completion of British explorer Tullow Oil's sale of stakes in local interests to develop oilfields until a $472 million capital gains tax dispute has been resolved. A Tullow oil spokesman in London would not comment on the vote. Last year, Tullow agreed to sell stakes in its Ugandan assets to Chinese group CNOOC and French oil company Total for $2.9 billion. The company has since been awaiting final government approval for a partnership expected to unlock a $10 billion investment developing the oil sector into production phase.

In March, Tullow said Uganda had assessed taxes of $472 million on its earnings from the sale, and it was disputing that figure. It has since commenced an arbitration process before a tax appeals tribunal in Kampala. Uganda is in another tax dispute with London-listed Heritage Oil over $405 million of capital gains tax. Arbitration to settle that row is under way in London.

Attorney General Peter Nyombi unsuccessfully requested the speaker, Rebecca Kadaga, to block the motion saying any debate on the oil sector was likely to be prejudicial to the ongoing arbitration processes. Uganda discovered hydrocarbon deposits along its border with the Democratic Republic of Congo in 2006 and production was expected to commence early next year. The vote was a sign of the growing frustration among lawmakers from the both opposition and ruling party over delays to the development of 2 billion barrels of oil reserves.

Angelo Izama, political analyst and director for Fana Kwawote, an energy think-tank, said before the vote that the government had a track record of ignoring the legislature and might proceed with the deal in any case. "The resolution will put the government in a bind, because if they respect it, it will elevate Uganda's political risk profile which has serious consequences. If they ignore, it portrays it (government) as disrespectful of the rule of law," he said. Parliament also voted for a moratorium on all new petroleum deals until a new law has been enacted.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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