And in April 2020, a new deal was reached at a revised value 575 million dollars down from the initial 900 million, while the capital gains tax payable has now dropped to 14.6 million dollars (54.5 billion shillings), according to Tullow Oil plc Head of Corporate Affairs, George Cazenove.
Uganda is expected to get USD 14.6 million (about 55 billion Shillings) as capital gains tax on the sale of oil and gas interests in Uganda
by Tullow Oil to French multinational oil and gas company TOTAL SE.
The long-drawn-out process of Tullow Oil exiting Uganda
has now entered the final chapter, after the Ugandan government and Uganda
Revenue Authority together with the two companies reached a binding agreement
on the taxes that should be paid.
Tullow discovered huge reserves of oil in the Lake Albert basin in
Western Uganda starting 2006. It had entered Uganda by acquiring the exploration interests of Energy
Africa 2004, and in 2007, it grew its fortunes when it acquired the licenses of
Australian explorer, Hardman Resources in 2007.
But the development of the industry has been
delayed by disagreements over legal and tax regimes. In 2010, it was not a smooth transaction when Tullow acquired the
interests of Heritage Oil for USD 1.45 billion. The government slapped a USD 434 million (1.62 trillion Shillings) Capital Gains Tax from the transaction.
The tax is charged on the value of the transaction if
the asset in question has gained value over time, but it is included in the
business income tax. After a long two-year battle, involving suits in Uganda’s courts and tax
appeals tribunal, as well as arbitration in a London court, Uganda won the
By then, more than 1.7 billion barrels of oil had been discovered in the rift
valley. At this same time, Heritage had deposited USD 121 million (451 billion
shillings) with URA as part of the tax in dispute but later refused to pay the
balance when the ruling was made.
Government forced Tullow to pay the balance of USD 313 million (1.168
trillion Shillings), before allowing it to get new and bigger
partners, Total of France and the Chinese group CNOOC to join the project.
To sale two-thirds of its interests to the new
partners, the government assessed a Capital Gains Tax of USD 472 million (1.76 trillion Shillings) on the transaction valued at USD 2.9 billion (10.8 trillion Shillings).
However, the Tax Appeals Tribunal revised this
amount to USD 407 million (1.9 trillion Shillings).
In 2017, as Uganda insisted on building a refinery on top of a crude
export pipeline, Tullow Uganda’s parent company, Tullow Oil Plc started
experiencing cash problems and decided to sell its entire assets in Uganda, to
pay off debts worth more than USD 900 million (4.4 trillion Shillings).
Tullow and the three partners found themselves as at loggerheads with the
state after it changed the route of the export pipeline to Tanzania’s port of
Tanga, away from Lamu in Kenya. Tullow eventually decided to sell its Ugandan assets to Total, leading to
another battle over taxes payable on the transaction then valued at 900 million
Uganda assessed the tax at USD 300 million (1.4 trillion Shillings), which is one-third of the
transaction value, but Tullow disputed this saying the transaction was not
taxable. Two years of negotiations saw the government reduce the bill to USD 167 million
(632.5 billion Shillings), while Tullow insisted on paying 85 million
(317 billion shillings).
If the transaction had been concluded in 2019, the government would have
received up to USD 85 million (317 billion Shillings). However, in April 2020, a new deal was reached at a revised value USD 575
million (2.8 trillion Shillings) down from the initial USD 900 million (4.4 trillion Shillings), while the capital gains tax
payable dropped to USD 14.6 million (54.5 billion
shillings), according to Tullow Oil plc Head of Corporate Affairs,
After 14 years of exploring for oil in Uganda, Tullow Oil is exiting the
country which now has 6.5 billion barrels of oil confirmed and 1.7 billion
recoverable, according to the government.
Tullow Executive Chairperson, Dorothy
Thompson says the sale of assets in Africa, particularly in Uganda and Kenya is
targeted at raising at least USD 1 billion to improve the company’s
“This is important for Tullow and forms the first step for our
programme of portfolio management. It represents an excellent start towards our
previously announced target of raising USD 1 billion. Tullow’s strategy to move to
a more conservative capital structure,” she said.