The Independent Uganda: You get the Truth we Pay the Price
Taming crocodiles
It was unsurprising, then, that Tullow’s 2017 decision should also run into problems. “The transaction which we have today is being looked at through the lenses of prior transactions,” says Denis Kakembo of Cristal Advocates, a law firm in Kampala with expertise in energy and tax.
The deal was structured so that Total and CNOOC would pay Tullow $200m in cash, and a further $700m towards its share of future development costs. But disagreements arose over several issues, such as how to account for the costs Tullow had already incurred between acquiring its Ugandan assets and selling them on. The government presented Tullow with a capital gains bill for $167m, which the company contested.
A compromise was reached after direct meetings between Museveni and Pouyanné. They agreed that Tullow would pay just $85m, with Total and CNOOC topping up the rest. They could not agree, however, about whether the two larger companies would inherit Tullow’s recoverable costs and count them against future tax obligations. That issue and others remained unresolved when the sale collapsed at the end of August.
The government put forward new proposals, which the firms have since accepted, Hanns Kyazze, a communications specialist at the ministry of energy and mineral development, told Reuters in December.
While the dispute has been resolved, the original sales agreement between the oil companies is dead; they will have to draw up another one, perhaps on fresh terms. Political attention is already turning to contentious elections in 2021.
The government also felt the cost of delay in its own pocket. It has poured money into roads, dams and airports on the promise of an imminent oil boom. A 2018 study by Sebastian Wolf, of the Overseas Development Institute, and Vishal Aditya Potluri, of the Harvard Kennedy School, forecasts that oil earnings will peak at 73% of the government’s non-oil tax revenues within a few years of coming on stream (assuming a price that starts at $77 a barrel and grows by 2% a year). Senior officials at the Bank of Uganda have warned that debts could become unsustainable if oil arrives late.
Everything now hinges on the final investment decision. “From the moment FID is announced, Uganda is going to change drastically,” says Hanns Kyazze, communications specialist at the energy ministry. Up to $20bn is expected to flow into the country to develop oil infrastructure.
But once a decision is finally reached, other challenges loom. Already, thousands of people in western Uganda have been displaced; some are contesting the resettlement package they received. Part of the oil lies below a national park.
In January six NGOs will challenge Total in a French court, claiming that it has failed to elaborate and implement its human rights and environmental vigilance plan. Uganda’s oil saga is just beginning.
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Adapted from the Africa Business Magazine
THIS is what I posted in response to an article by ANDREW MWENDA on the 16th September, 2019 (is this supposed to be the birthday of M7) and even before the ink has dried, what I predicted then, unsurprisingly
has come to pass.
September 17, 2019 at 11:27 am
“The multinational companies need the oil more than you may think; even if they go, others will surely come in. Use the time for better planning and capacity development of our fellow nationals in oil and gas.”
IT may be that, but hope you know that these oil companies act as a cartel, or call it a cabal, sometimes bordering on the criminal, and many times they act as one even if they appear as different entities and they do know how to share their spoils.
They have more time, and many times more resources than our poor countries, and most times know the greed of our rulers and as you have seen, when Tullow took action, Total took almost similar action.
Ultimately it will be our hapless rulers who will go back on their knees and tail between legs ( out of view/ sight of all of us of course), and then this time the stakes are even higher.
Or else we shall end up running to the Chinese who will also extract their own pound of flesh.
Right from the word go, most times the odds are stacked against us, and all this will have started with our own incompetence and greed.
And another post.
ejakait engoraton
September 17, 2019 at 6:55 pm
THIS whole thing boils down to just one person, and you know who it is.
EVEN a fool would know that the law regarding Capital Gains Tax is wrong, UGANDA is not a unique country to the extent that its laws differ significantly from those of other nations, in fact most of our laws are “cut and paste”in that they follow the template of laws from other nations, most notably for us , British/English law.And most laws are a matter of “common sense” which for once, rightly M9 said is not common.
But then again , we may be dealing with the “law of cattle keepers”, whereby if I give you a calf and you keep it til it grows, you give back my fully grown cow/bull, regardless of the effort I have put in to raise your calf. It is the basis of “empano”.
We all know that if they wanted the oil to come out of the ground tomorrow, it would laws or no laws. I have a feeling that it is not coming out is a result of one person who has never kept his side of the bargain all his life. HE may have taken a cut from the present oil companies and probably wants more over and above what was initially agreed, seeing as it is that these companies are making a “killing” by farming down their interest, and in so doing bringing on board a new party, or else he wants to frustrate these companies and then whatever new entities come in, the slate is wiped clean and they can start all over again.
IN this case if it was a person involved in the deal, then that person would be made to meet their maker so that as they say “dead men tell no tales”.