Saturday May 12 2012

MPs quiz oil company over failure to pay tax

By Isaac Imaka

As the investigations into the oil sector continue, Members of Parliament have grilled officials from Dominion Petroleum over failure to pay taxes and claiming for recovery costs yet they did not strike oil.

During the Ad hoc committee proceeding on Thursday, the MPs discovered that although the UK based company has not struck oil in Uganda, it submitted a recoverable cost bill worth $24 million [Shs58 billion] to the Ministry of Energy.

According to evidence tabled by the Dokolo Woman MP, Ms Cecilia Ogwal, Dominion Petroleum claimed to government that it had spent $526,000 in recoverable costs in 2007, $12 million in 2008, $1.3 million in 2009, and $9.8 million in 2010.

“According to the laws of Uganda, you are only supposed to claim for recoverable costs when you have struck oil. But now that you have not made any discoveries, what is the basis of your claims?” she asked. “I have had long discussions with the Ministry of Energy and they say you have not found oil. They say the claims were approved but were not audited.”

As a practice in the oil sector, under Production Sharing Agreements (PSA), oil companies invest in exploration and if they find oil, government pays back the money spent in form of recoverable cost. However, if the company does not strike oil, they suffer the loss.

Dominion Petroleum General Manager Antony Knaggs admits that the company sent the bills to government but said it only intends to collect it when they strike oil.
“We are not actually claiming to recover the money now,” he said. “We are just appraising the government on what we believe is recoverable in case we find the oil. According to the PSA, we are mandated to keep appraising government on what we think is the recoverable.”

Mr Knaggs’ response was not satisfactory to MPs. “If you have not got oil in a particular well why do you go ahead to file for recoverable costs?” Buhaguzi County MP Junjura Bigirwa asked.

On the failure to pay capital gains tax, Mr Knaggs informed the Committee that the government never asked the oil company for capital gains tax when it was bought off by the UK-based Oil Company Ophir Energy. “We were never assessed by the URA and that’s why we have not paid the capital gains tax,” he said.

In the same committee, Ms Elizabeth Mugumya Kutesa, the daughter of former foreign affairs minister Sam Kutesa, informed the committee that her job was never advertised.

Ms Kutesa’s name came up last year during the heated two-day October oil debate where the Lwemiyaga County MP, Mr Theodore Ssekikubo, accused her of getting the job thanks to her father’s influence and not through competitive application. But Ms Kutesa told the MPs that she never applied for the job but just “responded to a call from England Head office asking her whether she would like to work” with Dominion.

Ms Kutesa has been working with the oil company for two years as the regional commercial manager, responsible for legal and commercial matters in East Africa and DR Congo.