Tullow "Approaching Finishing Line" On Uganda Dispute
First Published Thursday, 27th January 2011 08:27 am - © 2011 Dow Jones
(Adds Ugandan government comment.)
LONDON -(Dow Jones)- Tullow Oil PLC (TLW.LN) is "approaching the finishing line" in talks with the Ugandan government to resolve a tax dispute that has held up for months its plans to bring in new partners to develop oil discoveries there, the company's chief financial officer, Ian Springett, said Thursday.
Tullow expects to reach an agreement that will allow it to proceed with its plans to sell a share of its Uganda assets to Total SA (TOT) and China National Offshore Oil Company (CEO) no later than a few weeks after the Ugandan elections on Feb. 18, Springett said.
That deal has been delayed because of a dispute between the Ugandan government and Tullow's former partner, Heritage Oil PLC (HOIL.LN), over capital gains tax. Some Ugandan officials have said Tullow should pay the $283 million in capital gains tax the government says Heritage owes in order to get the deal moving again.
However, Springett said Tullow "won't be paying Heritage's tax bill."
Simon D'Ujanga, Uganda's state minister for Energy and Minerals, told Dow Jones Newswires separately that the government wants Tullow to clarify some issues in its draft development plans for the oil fields in the Rift Valley before granting it a production license, which should pave the way for the approval of its planned joint venture with Total and CNOOC.
"We are still negotiating; a few things still need to be clarified," he said. The tax dispute also needs to be resolved before the deals can get government approval, he said.
Tullow is finalizing the engineering design of the Kaseme oil field development where it expects to produce first oil next year. The company has also submitted draft field development plans for the Mputa, Waraga and Nzizi fields, all located in block 2.
The government will have to first approve the development plans before issuing production license, D'Ujanga said.
Despite the five-month delay in the deal with Total and CNOOC, who are expected to pay Tullow in excess of $1 billion for a share in the Ugandan assets, Tullow has no funding problems, Springett said.
Tullow began production from oil discoveries offshore Ghana in December at a rate of 50,000 barrels a day, which will rise to 120,000 barrels a day later this year. Springett said Tullow will generate around $1 billion in cash flow from its Ghana fields this year.
Company website: http://www.tullowoil.com
-By James Herron and Nicholas Bariyo, Dow Jones Newswires; +44 (0)20 7842 9317; firstname.lastname@example.org