uganda tax resolved, page-7

Hard to see this dispute ending until after the Ugandan elections, hence it will drag on for more than 12mths.

www.dowjones.com
Dow Jones Newswires.
DJ Uganda President: Total, CNOOC Deals Hinge On Tullow Payment
01 Nov 2010 - 14:53
By Nicholas Bariyo

SPECIAL TO DOW JONES NEWSWIRES

KAMPALA, Uganda--In a national address to launch his party's manifesto ahead of 2011 presidential elections, Uganda President Yoweri Museveni Monday said Tullow Oil PLC (TLW.LN) must pay a long-disputed tax bill in order for Uganda to approve Tullow's deal with China's CNOOC (CEO) and French oil major Total SA (TOT).

Museveni said Uganda would prefer to leave its oil in the ground rather than accept a bad deal with foreign oil companies.

"This oil has been in the ground for millions of years and we have told them that if you don't accept out conditions, it would rather remain in the ground" Museveni said.

The issue relates to capital gains taxes associated with Tullow's purchase from Heritage Oil PLC (HOIL.LN) of 50% stakes in two blocks in the Lake Albert Basin for up to $1.45 billion. 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.

Museveni's comments contradict earlier indications that the long-standing Uganda president was prepared to let through separate transactions between Tullow and Total and CNOOC without formally linking the deals to the resolution of the Tullow-Heritage tax deal. Museveni gave preliminary approval to a memorandum of understanding outlining such a compromise, according to an Oct. 19 Dow Jones Newswires report that cited a Uganda government source.

But Museveni said Monday that Tullow must meet all the tax obligations of Heritage if the farm-out to CNOOC and Total is to be approved. His remarks came before some 1,000 party delegates, lawmakers and diplomats at an international conference center. Some in the crowd cheered when Museveni referred to the taxes as "their money."

"If am going to catch someone and you obstruct me, then I go for you. Tullow must pay that taxes in full because they allowed Heritage to leave the country without paying," Museveni said.

"This tax is yours, its your money and it will have to be paid," he told the crowd. "These people thought we are like other African countries but we have said, 'No.'"

Museveni, in power since 1986, is seeking a fourth constitutional term in office. He faces seven opponents. Polls are scheduled to be conducted in February 2011.

-By Nicholas Bariyo, contributing to Dow Jones Newswires; 256-75-2624615 [email protected]


(MORE TO FOLLOW) Dow Jones Newswires

November 01, 2010 10:53 ET (14:53 GMT)