Saturday 3 December 2016

Tullow Oil 'happy' over €220m settlement

Paul O'Donoghue

Published 23/06/2015 | 02:30

Tullow said it had been given an exemption from capital-gains tax on one of the blocks by a previous minister of energy.
Tullow said it had been given an exemption from capital-gains tax on one of the blocks by a previous minister of energy.

Irish-listed oil explorer Tullow Oil said that it is "happy" with a settlement that will see it pay out $250m (€220m) to the Ugandan government and the Uganda Revenue Authority (URA).

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A spokesman for the company also said that the ruling is a "positive development" for its interest in the potentially lucrative Lake Albert oil venture in Uganda, in which the firm is due to make an investment decision on by the end of next year.

The Ugandan Revenue Authority had originally imposed the tax on the $2.9bn sale of Tullow's 66pc stake in three oil blocks in the Lake Albert basin to France's Total SA and China National Offshore Oil Company.

Tullow said it had been given an exemption from capital-gains tax on one of the blocks by a previous minister of energy.

However the tax appeals tribunal (TAT) said the minister at the time wasn't authorised to grant the exemption and assessed Tullow's CGT liability for the farm-downs at $407m less $142m previously paid.

Tullow strongly criticised the ruling at the time, saying it believed that the TAT had "erred in law". At the time CEO Adrian Heavy said the decision ignored "a contractual term signed by a government minister in Uganda". Tullow subsequently appealed the ruling to the Ugandan High Court and continued with a concurrent International Arbitration claim. Both legal proceedings have now been withdrawn after the settlement.

The full settlement amount is made up of the $142m that Tullow paid in 2012 to launch an appeal to the TAT and $108m to be paid in three equal instalments of $36m.

A spokesman for Tullow Oil told the Irish Independent that the company is "happy with the settlement" and that "we felt it was a good outcome for Tullow.

He added: "Litigation in Uganda carries risks. There is always the chance you could go through the whole process and pay the full amount of more than $400m plus legal costs, if you can settle out of court you always will.

"It needed to be solved, it was something that was hanging over the project. I think that this will move it on and is a positive outcome for the project."

Tullow has previously said the three partners could spend between $8bn and $12bn to develop the oilfields.

Uganda discovered exploitable deposits of oil along its volatile western border with Democratic Republic of Congo in 2006, and officials now estimate reserves at up to 3.5bn barrels.

Irish Independent

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