Tullow buys Heritage oil assets

Kampala

Oil exploration company, Tullow Uganda has finally acquired the ownership of Heritage Oil and Gas in two oil blocks in western Uganda, despite an on-going tax dispute with the government.

Yesterday, Heritage announced that Tullow had paid $1.45 billion (Shs3.3 trillion) for its 50 per cent interests in Block 1 and 3A, which they co-owned. The transaction marks a major milestone towards the commercial production of Uganda’s oil reserves, according to Mr Aidan Heavey, the chief executive officer Tullow Oil Plc the parent company of Tullow Uganda.

Heritage Oil, however, said it had only received $1.045 billion (about Shs2.3 trillion) while $405 million (Shs911 billion) has been deposited with the government to be held temporarily in view of a pending tax dispute between Heritage and the Uganda Revenue Authority (URA).

Ministry unaware
But Mr Keith Muhakanizi, the deputy secretary to the treasury, was unaware of the payment. “I have no idea. Check with Ms Allen Kagina [the commissioner general URA],” he said in an interview.

Yet, Heritage further claimed it had deposited about $121.5 million (Shs273 billion) with URA, representing 30 per cent of the disputed tax assessment of $404.9 million which URA expects to get from the transaction as corporate tax.

By last evening, Daily Monitor had not confirmed from URA if it had received money from Heritage but URA officials were in a meeting to discuss the transaction, according to Mr Peter Kauju, a URA spokesperson.

Oil production
In the meantime, Tullow has paid up $100 million (Shs2.2 billion) as a final settlement of a potential contractual dispute between Heritage and URA, on the interpretation of the sale and purchase agreement provisions relating to the disputed amount of due tax.
The Tullow and Heritage deal, which leaves the buyer with 50 per cent ownership in Block 1 and 3A, paves way for the commencement of a $10 billion refinery to develop Uganda's oil reserves.

Tullow, which can not afford to build a refinery on its own is expected to bring Chinese company China National Offshore Oil Corporation (CNOOC) and France's Total to kick off the commercial oil production in the country. Mr Heavey said the trio’s development plan is expected to deliver production well in excess of 200,000 barrels of oil per day.