Tullow Says Tax Dispute With Uganda Has Been ResolvedJanuary 11,...

Tullow Says Tax Dispute With Uganda Has Been Resolved
January 11, 2011, 7:01 AM EST
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e-mail this story print this story 0diggsdiggadd to Business Exchange By Fred Ojambo

(Updates with comment by company officials in second, third paragraphs.)

Jan. 11 (Bloomberg) -- Tullow Oil Plc and the Ugandan government have resolved a tax dispute that has held up the company�s plans to start producing the East African nation�s first crude, a company official said.

�For all intents and purposes, the tax issue is resolved and we are discussing the way forward,� Elly Karuhanga, chairman of Tullow Uganda, said in an interview today in Kampala, the capital. A disagreement over an exploration license canceled by the government last year has also been addressed, he said, without providing further details.

Tullow shares rose as much as 2.7 percent and were up 21 pence, or 1.6 percent, at 1,371 pence by 11:52 a.m. in London.

Tullow, the U.K. explorer with the most licenses in Africa, paid about $1.5 billion in July to Heritage Oil Plc for its interests in Block 1 and 3A in the Lake Albert basin. Uganda has delayed final approval on the purchase of the stakes, saying it is owed $404 million in capital gains tax from the transaction.

In August, Uganda canceled Tullow�s exploration license for the Kingfisher area in Block 3A because it had expired and the company hadn�t applied for a production license, the New Vision newspaper reported, citing Energy Minister Hillary Onek.

Tullow plans to start oil production in Uganda in 2012 and not this year because plans to meet the earlier target are �quite challenging,� Brian Glover, the company�s manager in the East African country, told reporters at a conference for the company�s suppliers in Kampala earlier today.

Tullow�s investment in the East African country will increase to about $10 billion over the next decade, making it the region�s biggest investment project, Glover said at the conference. The amount will increase from the $800 million spent so far on oil exploration in Uganda, Glover said.

--Editors: Paul Richardson, Stephen