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 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.
"We've nailed down all the main points," in a legally binding
memorandum of understanding to resolve the dispute, said Tullow's Chief
Executive Aidan Heavey.
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.
The run up to the Ugandan election has played a big part in delaying resolution
to the dispute, said Heavey. "During times of elections, things tend to
slow down," he said. "A lot of people [from the government] were out
electioneering."
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.
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