Cabinet approves Shs600 billion Tullow-Total deal

Kampala- Cabinet has okayed Tullow Uganda Limited to sell up to 21.57 per cent of their assets to Total E&P Uganda B.V and Cnooc Uganda Limited.
In their Monday meeting chaired by President Museveni, Cabinet noted the proposed transfer of interests which have been priced at about Shs3.4 trillion ($900m) in Block 1, 1A, 2 and 3A by Tullow to Total E&P Uganda B.V and Cnooc Uganda Limited.
During the weekly press briefing on Cabinet resolutions, Col Shaban Bantariza told journalists that the move is intended to improve trade and national free business within companies.

“We have no business about the two companies exchanging deals most especially when it doesn’t cause any kind of loss to the country or either side. In any case, they are free to trade in this country. We can’t block such a move,” Col Bantariza said.

In January 2017, Tullow announced selling 21.57 per cent of its interest in each of the three exploration areas to Total E&P.

Ms Irene Muloni, the Energy minister, last year responded to the intentions indicating that in principle, they (government) had no problem with the arrangement as long as they settled the revenue requirements with Uganda Revenue Authority.

The move leaves Tullow with one hurdle of clearing Capital Gains Tax (CGT) worth $167m (about Shs614b) to URA.

The CGT is a tax on the profit upon sale or disposal of something such as an asset that has appreciated over time.

Mr Jimmy Mugerwa, Tullow’s country director, said they have been engaged in several meetings with URA to make sure they settle the outstanding bill before they make the transaction as required by law.

“Until last week, we have been in touch with URA officials. We are ready to make the transaction as soon as this money is available and what is holding us of now is the pending agreement we have to finish with the tax collectors (URA) before we finish business. This was a position we arrived at long time ago and we cannot change our minds about it,” Mr Mugerwa said.

The back and forth haggling over the terms of the deal, including operatorship of Tullow’s oil fields in EA2 and protracted discussions on CGT, meant that the government had to delay its approval.
BACKGROUND
Uganda’s oil belt—the Albertine Graben— is split into three Exploration Areas (EAs); 1,2 and 3.
The EA1 is located in Nwoya, EA2 in Buliisa while EA3 is in south Lake Albert in Hoima and Kikuube districts. Each of the three oil companies owned 33.33 per cent shares in each of the three exploration areas.