uganda dispute close to resolution

Dow Jones Newswires.DJ 2nd UPDATE:Tullow CFO: Agreement Close To End Uganda Deal Block
06 Oct 2010 - 12:35
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By James Herron
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Tullow Oil PLC (TLW.LN) is close to resolving a dispute with the Ugandan government that has been holding up its plans to sell part of its oil assets in the country to Total SA (TOT) and China National Offshore Oil Company (CEO), said the company's Chief Financial officer Ian Springett Wednesday.

Tullow is working with the government on the final drafts of a memorandum of understanding that will "decouple" Tullow's partnership plans with Total and Cnooc from a dispute between the government and Heritage Oil PLC (HOIL.LN) over the payment of more than $400 million in capital gains tax, Springett told reporters on the sidelines of the RBC Capital markets oil and gas conference in London.

"We have a team in Uganda we believe are very close to finalizing the basis with the government to move forward with the farm down with Cnooc and Total," he said.

The dispute with the government has caused a small delay to Tullow's development plans, but this is small in the context of the development plan that will extend to 2015, he said.

Springett said he was confident that Tullow's loss of the license for block 3A because of the delay will be temporary.

In July, Heritage sold its half of stakes in blocks 1 and 3A in the Lake Albert basin to Tullow for up to $1.45 billion, but Heritage declined to pay a 30% capital gains tax on the transaction, which prompted the government to withhold its endorsement of the deal, preventing Tullow bringing in new partners.

Tullow has already paid $1 billion to Heritage for the purchase. A third of the $405 million in disputed tax has been paid to the Ugandan authorities, and the remainder is in an independently administered escrow account.

Heritage has said it would accept the result of international arbitration over the dispute, but Uganda has previously resisted this. However, some Ugandan officials have expressed concerns the dispute could harm the Ugandan economy by delaying the development of around a billion barrels of oil discovered there.


-By James Herron, Dow Jones Newswires; [email protected]; +44 207 842 9317


(END) Dow Jones Newswires

October 06, 2010 07:35 ET (11:35 GMT)

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