Tag: Ministry of Energy and Mineral Developement
A Breakdown: Oil Exploitation, which is so taxing… why are the deals confidential?
Today, the Government of Tanzania have together with the Government of Uganda signed off to a Host Government Agreement (HGA), also together with Total, the supposed builder of the East Africa Crude Oil Pipeline (EACOP).
Today, all the years of waiting, stalling and finding measures of taxes pays-off. We can still wonder what is basic fee structure and what is the price of taxation of the extraction of oil exploitation in the Lake Albertine basin. In the same regard, we can wonder is the specific route for the pipeline and what consequences it will have to nature, reserves and national parks. Because, the drill itself is just in the near proximity of Murchinson Fall National Park. Before it will continue or pass through other untouched areas of both Uganda and Tanzania.
There is still not answers or openness about the deals in the regards to the Uganda National Oil Company (UNOC) and the Tanzania National Oil Company (TNOC), in combination to the ownership and licences of China National Offshore Oil Company (CNOOC) and Total. Therefore, there are plenty of stakeholders and everyone wants to profit on the resources.
With both Republics signing of the HGA agreement and preparing for the Final Investment Decision (FID). The building of the pipeline and the industry can start off. This has also been stopped by taxation and the questionable acquisitions of exploitation licences in Lake Albert. Therefore, the whole Heritage and Tullow taxation case and the costs it had for Total to pay off that. Is still not shown to the public or if the Government of Uganda has forgiven the past company to give way. While Tullow surely wanted profits for their time and the valuable licences they had gotten rights too in earlier rounds.
What is also worrying to me? Well, the deals are not public. The agreements between the Corporations and the Republics are practically unknown and only mere fragments is out. Just like the power-sharing of 60% to Tanzania and 40% to Uganda. Is still not saying much, considering this will be still carved up by Total and CNOOC too, also some sort of deal with UNOC and TNOC. These will not operate on charity, but as a benefactor of the Republic itself.
The public should know this, because it is public resources, state resources and oil exploitation on public land. The companies are using licences and also the same licenses to transport the crude oil in the pipeline from Lake Albert to Port Tanga. Therefore, it is needed to get this knowledge to show the price, the agreements and the possible perks. Because, we don’t if they even have strings or not.
We should wonder why its confidential and kept a secret. The companies should also be displeased, unless they like to exploit without any transparency. Because, these deals and arrangements haven’t been made transparent or with accountability. It has been done in the chambers of Entebbe and in Tanzania. The general public will only see a fraction and not know the full extent.
That is a deliberate action by Presidents and their handlers. The UNOC, TNOC, Total and CNOOC can operate without to much scrutiny and just enjoy the cheers. There is a need to know, but don’t expect it. Since, the GoU and GoT haven’t delivered this in past, neither has the GoU showed anything from the previous deals with Heritage/Tullow. Why should they suddenly change of heart?
I don’t think so… unless there is a sudden miracle. If not … if there is a shady deal and one company feels used and will take it to an international court. Then, we will see some evidence of what went down. However, until then… we only know the bits and pieces. Peace.
A Breakdown: Oil Exploitation, which is so taxing… can start if Tanzania signs a deal too..
Last year in September 2019, the Farm Down Agreement of Tullow Oil was supposed to be traded to Total E&P Uganda. This was a long and prolonged negotiations, as the British Tullow Oil has been in dispute of taxation and payments of fees the Government of Uganda, which was deemed as the “Presidential Handshake”.
What happen yesterday with the Financial Investment Decisions (FID) of Total, as it has taken over the stakes of Tullow Oil. While agreeing on added terms in combination with the China National Offshore Oil Corporation (CNOOC) to drill after petroleum in various of blocks on Lake Albert, also build the petroleum pipeline from Hoima to Port Tanga, Tanzania.
The Port Tanga and Pipeline agreement was sealed in 2017 between the Government of Uganda (GoU) and Government of Tanzania (GoT). That after lots of meetings and consultations between the parties. There was some who even tried to get it Port Lamu in Kenya, but that was ditched. Also, causing a rift between Dodoma and Nairobi.
Now, the next step is that Total and CNOOC is able to get a Host Government Agreement (HGA) for the East Africa Crude Oil Pipeline (EACOP) project. That was agreed by the parties in Entebbe for the territory of Uganda, but it is not sealed with Tanzania.
Though it should be in the interest to sign an agreement with President Magufuli and the CCM. Now, that they have fixed the first part and the licences to drill on Lake Albert. Total and CNOOC needs the HGA in Tanzania too. That will be beneficial for the Republic there too.
This has been a long time… the first reports of agreements and production licenses to blocks on Lake Albert in early 2000s. This was agreements being made between the government and the Tullow/Heritage and ENI as well. Which later has caused rift between the companies and the Republic, as the Oil Companies wasn’t willing to pay taxes and the Uganda Revenue Authority (URA) needed to win a Court Case in 2014 to get taxes owned paid by Tullow, as they had to cover the loss of taxes from their acquisition of Heritage Oil.
So, the news today is big. Maybe, the President got another Presidential Handshake, as the Tullow Oil Taxes case brought a lot of kickbacks. The deals sealed between Museveni and Total is a secret. Therefore, only the agreement of what it does is in public, but not the costs, the tax-grade and the limitations of it. Total and CNOOC can have gotten it for cheap for all we know.
That is something for the time to tell. Now, the Lake Albert Basin, the Lake Albert Blocks for drilling is sealed, which has been in question and awaited a verdict for years. The same has the years of a agreement for a company to build the pipeline and pay the rates for having the operation going.
Now, there is one final agreement that needs to be sealed in Tanzania. By all means, the Republic’s needs also to settle the routes, the land-acquisitions and other arrangements too. While the other HGA is necessary to get started. As the process is now moving. The initial agreements are made, but the companies still needs goodwill elsewhere to make this pop-off. This will be years in the making. As the state of Uganda is scheduling a Oil Refinery in 2023, but that depends on everything else goes as planned at this point.
And in this business, at this point, everything that can be stalled and discontinued can happen. Even, if one of the companies stops seeing the financial viability and lack of profits. Than, they might suspend and try to sell the Producing Licenses Agreement to someone else again.
I wouldn’t be shocked, if Total bails out or something. There been so many companies involved and we are still not starting production. This being in the works since the early 2000s with the modern day deals and new arrangement for petroleum activity in the Lake Albert basin. That is why I am reluctant. Because, at any given moment, someone gives way and it sto
Africa Institute for Energy Governance (AFIEGO): Youth and CSO Case angainst TIlenga EIA Certificate set for hearing today (01.10.2019)
A Breakdown: Oil exploitation, which is so taxing…
In the Republic now its official that the companies that was supposed to buy the stake and the licences to drill for oil from Tullow Oil have backed out. This means, that Total and CNOOC is not operating or willing to foot-the-bill that Tullow left behind.
This is all a play for guards, they all want the slice of the price, but don’t want to be taxed for it. They want tax-holidays for operating and extracting the oil, even as the incentives to build the oil pipeline to Tanga, Tanzania is put on hold. Since a big part of the Lake Albert Basin is still in question. Since, the Tullow Oil doesn’t want to deal with the taxes in question.
Tullow Oil have to back-pay taxes, which it lost in court. They are obliged to pay these, but want the other companies to foot-the-bill, since they will drill and exploit situation. The others gather that this has occurred before they did and that Tullow should pay it. That is why it’s a dead-lock. Because, none of the companies want to pay the taxes.
This is the infamous taxes, which led to the Presidential Handshake drama and wobbling defence of it. That made all the people and civil servants dance for a hot minute. Now, we are seeing the deadlock because of this one.
The state is allowed and should tax the ones whose operating in their territory. Without a question or without any hesitation. Because, they should be able to pay for your rights to be able to do business somewhere. However, here it’s a mismatch of the amounts gained in courts and the planned surrender of Tullow.
Tullow considered that their Farm-Down deal with Total and CNOOC would clear their old debts with the Republic. Instead, the other companies want its shares, but not its past invoices. Which is natural. Because, your paying for other peoples misfortune and cost of operating. That is simple math.
It is Tullow that has done business, who has been operating and whose been in charge of certain parts of Lake Albert Basin. They got to stay responsible. Now, they just looking like a shell-company wanting to be a tax-evasion corporation, who puts their costs on their trading partners.
Within that reason, its understandable that Total and CNOOC wants to have other options and other obligations, also pay their taxes and returns, if they start to drill on the licences previously kept by Tullow. But at this moment, the company think it can get the hook and crook.
Because the victory of the President Handshake isn’t a bargain, but a huge toll for the company. That is why it wish to push the envelope to someone else. This is not natural, but not without a consequence. That they are backing out and giving way. Instead of going into business on these sectors of Lake Albert.
The loss, is also the proposed earnings, the supposed development of the oil sector and the pipeline to Tanzania. As everything stops and shuts its operations. As the CNOOC is sacking employees and who knows what Total does too. Tullow might even do it too, until they find someone who wants to pay their bills. Because, from history they showing that they don’t want too.
The state one, what was theirs, but the companies doesn’t want to pay to play. They want tax-holidays and a free ride to the promised land. That doesn’t happen and therefore, the stalemate and yet another set-back for the oil development there. Peace.
Uganda: Statement on the Status of Tullow Farm Down (29.08.2019)
Tullow Oil terminate agreement with Total and CNOOC over a tax dispute in Uganda
Today, the agreement published between Tullow, Total and CNOOC made a Sale and Purchase Agreement (SPA) on Area 1 and Area 2 in the Lake Albert Basin in the Republic of Uganda. That deal was issued on the 30th August 2016.
Now, nearly three years later. Tullow Oil has now back-tracked and said the deal didn’t go through. Surely the SPA and the Joint Venture Agreement wasn’t settled properly. If not, then the press release of Tullow wouldn’t say this:
“Tullow Oil plc (“Tullow”) announces it has been informed that its farm-down to Total and CNOOC will terminate at the end of today, 29 August 2019, following the expiry of the Sale and Purchase Agreements (SPAs)” (…) “The termination of this transaction is a result of being unable to agree all aspects of the tax treatment of the transaction with the Government of Uganda which was a condition to completing the SPAs. While Tullow’s capital gains tax position had been agreed as per the Group’s disclosure in its 2018 Full Year Results, the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC as buyers” (…) “Tullow will now initiate a new sales process to reduce its 33.33% Operated stake in the Lake Albert project which has over 1.5 billion barrels of discovered recoverable resources and is expected to produce over 230,000 bopd at peak production” (Tullow Oil plc – ‘Termination of farm-down agreement with Total and CNOOC in Uganda’ 29.08.2019).
This deal fell through because the companies didn’t want to compensate each other for back-taxes or the taxation of the possible profits to the Government of Uganda. Something that was approved upon the Joint Venture Agreement in August 2016 with Total and CNOOC.
This shows how hard it is start-up and the issues by operating in Uganda. Even Tullow Oil plc is trying to figure this one out. It was only in January 2017, when the Total was supposed to buy the biggest part of operated stake of 21,5% from Tullow. Surely, with the announcement in 2018 and now in 2019. This has all backfired and stopped, because URA and the companies couldn’t agree on their fees.
That dispute is the one that was interconnected with the “Presidential Handshake” of 2017. As the 6 billions shillings was doled around to civil servants and high ranking officials, who secure the capital tax gain from Heritage/Tullow Oil, which was awarded in February 2015.
Therefore, Tullow has to now find new buyers for their USD $167m stake in the Lake Albert Basin. This would be the payment of the Capital Gain Taxes (Awarded $157 Million) to the Uganda Revenue Authority. Apparently, Total and CNOOC didn’t want to do that apparently.
So from August 2016 to August 2019, the three companies and URA couldn’t come to an agreement on Capital Tax Gain, which Tullow owe URA after losing their case in February 2015. This shows, that the big victory of the state in this matter. Is actually making it harder to find someone who can afford or see it feasible to drill for oil in Area 1 and Area 2.
This is how it seems and the two other companies didn’t want to pay for what Tullow did before them. Peace.
Uganda National Oil Company: Press Release (14.05.2019)
Uganda National Oil Company (UNOC): Dr. Josephine Wapakabulo resignation letter as Chief Executive Officer (13.05.2019)
UNOC Signs Memorandum of Understanding With CNOOC to Start a Partnership in Exploration in the Albertine Graben (05.09.2018)