Who wins, gains in deadlock between government and oil companies?

Recently, President Museveni attended the Uganda-Tanzania business forum held at the Julius Nyerere International Convention Centre in Tanzania. The theme of the conference was, “promoting bilateral trade and investment for growth and sustainable development”.
The forum was organised with the hope of bringing together business leaders, policy makers and other stakeholders interested in exploring opportunities in Uganda, Tanzania and across neighbouring East African countries.

According to Dr Philemon Mateke, Uganda’s State minister for Regional Affairs, “Governments of Uganda and Tanzania are continually working hard to create an enabling environment for trade, there is peace in both countries, and infrastructure has been worked on. Therefore, [there] is no excuse for not carrying out trade between the two countries.”
However, although Uganda seems to be heavily engaged in infrastructure development in readiness for the nascent oil and gas industry, there is suspicion of growing disagreements between multinational oils companies operating in Uganda and the government.

The issue of contention seems to be a request for waivers and tax exemptions. Therefore, a deadlock that might have a direct and negative impact on the export pipeline project is quietly brewing.
On the sidelines of the Uganda-Tanzania business forum, President Museveni expressed displeasure at international oil companies which appear not to appreciate the amount of effort Uganda is currently putting in developing the oil industry, including the systematic development in infrastructure specifically to support growth in the oil and gas industry.

Discoveries in Lake Albert oil fields are estimated to be more than 1.7 billion barrels of crude oil.
According to media reports, President Museveni made some remarks about the multinational companies, saying: “You asked me for an airport, I went to London and borrowed $350 million. Now you are saying you don’t want to invest even after I delivered the list of things you asked of me?”

The cause of tension between parties seems to come from oil companies making stringent demands from government of Uganda for tax waivers, more concessions, as well as changes in legislation to facilitate minimal risks and increased rewards.
The stand-off between the President and the multinational oil companies seems to have put a stop to any further development in the oil industry until the impasse is resolved. In particular, the critical stage of development of the export pipeline seems to have also stalled.

Both British oil company Tullow and French oil company Total may be threatening government and causing disruptive actions that is constraining further developments because there are on-going disagreements between them and Uganda Revenue Authority over final payments for the sale of Tullow oil filed interests (21.6 per cent in the Albertine oil fields) to Total and China National Offshore Oil Company (CNOOC).

In the face of further posturing by government and the multinational companies, there are also growing suspicions that Tullow’s recent farm down was a carefully crafted plan, executed to coincide with actions by Total and CNOOC to lay off workers.
It is possible that these actions were designed to try and force government’s hand into softening its position on the tax demand deadlock.

The position taken by government, insisting on a fair share of capital gains and income tax payments could result in more frustrations.
At the same time, compromising and taking less taxes could also be unfavourable to Uganda and in the long run, resulting in high costs and significant loss of revenue.
It remains to be seen which direction government and the multinational oil companies will take to resolve the ongoing deadlock.