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Archive for the tag “Total E&P Uganda”

Africa Institute for Energy Governance (AFIEGO): Youth and CSO Case angainst TIlenga EIA Certificate set for hearing today (01.10.2019)

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A Breakdown: Oil exploitation, which is so taxing…

 

The deal that broke down these days…

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)

Uganda: Statement on Escalating Fuel Prices of Petroleum Products by Minister of Energy and Mineral Development (20.11.2018)

UNOC Signs Memorandum of Understanding With CNOOC to Start a Partnership in Exploration in the Albertine Graben (05.09.2018)

The Presidential Handshake lives on!

You would think certain scandals and certain ways of thieving the public funds would be died down. The stories would end and the beneficiary of these scandals want it to go away, as it taints their legacy and remaining words about their time as Public Officials, as Clerics and Civil Servants within the State. However, in the matter of the Presidential Handshake, this whole thing just getting more legs and doesn’t die. It is like the President is proud of his bribing ways and proving a point today.

As the NBS TV reports:

“The High Court in Kampala has issued an interim order stopping the Inspector General of Government (IGG) from investigating and forcing beneficiaries of the 6 billion shillings presidential handshake to refund the money” (…) “The public officials had received the money as a token for their role in the 400-million-dollar Heritage Oil arbitration case which Uganda won” (NBS Television, 13.07.2018).

It is like the whole charade was mocked by the legendary report calling it an ‘error’ but not a crime. To give away public funds to civil servants and public officials, as a handshake after winning a court case. It is like the state doesn’t care about their lack of transparency, as long as the cronies are funded.

My favourite quotes from the report published in May 2017 says:

“This “handshake” expenditure was not budgeted URA activity and therefore, a diversion of the UGX 6 Billion without lawful authority was contrary to the PFMA” (…) “H.E. The President’s approval of this “handshake” was bonafide. However, it was an error of judgement” (…) “That all funds paid out of URA account to the beneficiaries of the “handshake” should be refunded” (…) “The Executive should come up with a Bill within 90 days to regulate and streamline the Presidential Donations Budget” (COSASE, P: 45, 2017).

After my calculation were all well beyong 90 days and nothing fruitful has happen, except now the High Court are saying the non-budgeted and the error of judgement by the President is “okay”. They don’t even have to refund, while there is no bill to regulate or streamline any Presidential Donations Budget, because who would dare to cross the authority of the State House and President at this point of time. No one with a clear mind, who will not end up in prison or lose his or her livelihood.

This is a proof of how little power the Parliament have in the current state, as they cannot even look into or question the Presidential Handshake. They cannot even check into the sudden gifts and donations made by the President. Which is a substantial part of the State House yearly budget.

This isn’t funny, this is a mockery of all the ones paying added taxes and paying for state services, as they are being hold in contempt, where a certain amount of big-men and cronies within the state can eat directly of it, without any consequence. Who knows what else the President misuse funds on, right now? Peace.

Reference:

The Committee on Commissions, Statutory Authorities and the State Enterprises (Cosase) – ‘Report of the Committee on Commissions, Statutory Authorities and the State Enterprises (COSASE) on the Investigations into the Circumstances under which the reward of UGX 6 BN was given to 42 Public Officers who participated in the Heritage Oil and Gas Arbitration Case’ (May, 2017)

The Uganda Budget Framework Paper FY2018/19 for Energy and Mineral Development is saying that the External Financing is the key for this Sector – Period!

The Budget Framework Paper for Financial Year of 2018/2019 for the Ministry of Energy and Mineral Development is really revealing how the financing of the sector is and how the state is involved with the manner. Also, how low-key the main factors are and lacking transparency is hitting the Energy Sector of Uganda. Not that is surprising, since the agreements, the licenses and the tenders are usually kept behind closed doors.

However, the main part of the Framework Paper is evident of the issues at hand:

The indicative budget ceilings for the Ministry of Energy and Mineral Development have been rationalised in line with the sector priorities and national priorities as communicated in the Budget Call Circular and in the Presidential Directives. The ceilings for Vote 017 for the FY 2018/19 are as follows: Wage Recurrent is UGX 4.23Bn; Non-Wage Recurrent is UGX 74,04Bn; GoU Development is UGX 307,84Bn and the Development Partner contribution is UGX 1,608.41Bn. Under Vote 123 ceiling is UGX 81.98Bn is for the GoU Domestic Development and UGX594.00Bn is from external financing” (Energy and Mineral Development, Budget Framework Paper FY 2018/19, 2018).

The building of vital infrastructure, the refinery, the pipelines and energy production facilities are all dependent on funding from abroad. If it is grants, loans or paid-in-full agreements done in secrecy. Because, there are more than the shadows of this budget framework paper. It is saying a lot and the votes for the future is showing the future too. That the Ugandan economy is prospering, as the budget are needing all funding from afar to be able to build needed infrastructure. Also, needs the grants for the Rural Electrification, the ones who the state has even borrowed to do.

Therefore, this Budget Framework Paper is showing the troubles ahead. This isn’t voting for better economy, know this is dependency and also proving how much the donors and partners are involved in making sure the economy gets addicted to it.

When it comes to the refinery, the details are clearly still in the wind: “The process of selecting of the Lead Investor is still progressing and the negotiations are ongoing between Government and the selected investor. The process is expected to be completed in FY 2017/2018. There after FEED and ESIA for refinery development will be undertaken with the Lead Investor on board” (Energy and Mineral Development, Budget Framework Paper FY 2018/19, 2018). So the selecting of it is not finalized, well, for some thought Russians had secured agreement and the reason for Museveni to visit Moscow. Clearly, that ship has sailed, we can wonder if Total or any other company would do this. As Total has the biggest chairs of licenses in the Lake Albertine Basin. Time will tell, but another proof of lack of transparency, when the Ministry has to write this.

Procurement Bottlenecks including lengthy bidding processes that require no-objections from the external financiers at each stage of execution. There is need for PPDA to revise guidelines for procurements relating to flagship projects. In addition, the following measures need to be considered: financing agreements are signed, project is almost ready to kick off. PPDA should reduce the administrative review timelines that sometimes stall progress” (Energy and Mineral Development, Budget Framework Paper FY 2018/19, 2018).

This here is initially following the guidelines of the First Amendment of the 1995 Constitution of 2017, the Land Amendment that the National Resistance Movement put forward before the Age Limit. That would fit the narrative of the Ministry and their wishes. It is like reading the same idea, to give more power to the state and able to land issues quickly.

What we can learn, also and which is important, these developments, these infrastructures projects couldn’t have been built if it wasn’t for external loans, externals grants or direct aid, if not on the license fees and the parts that is taxed. However, the grand amount and the majority of the projects needs the external funding.

This is not surprising, it is to be expected because Museveni doesn’t want to use his money. He want to spend other people’s money and also the money of the future. To benefit him today, that is why the deals are done in the secrecy…. We don’t know the reasons and the value of the licenses, the ones who is to build the refinery, even the grand agreement between the Corporations who will build the Pipeline. We know that certain companies has failed to build the dams and used bad material, but that is because of the Chinese Contractors has saved money, while being paid-in-full.

President Museveni blessed that deal and got scraps back. Time will tell, but this isn’t a good look. Not because I want it to be bad, but because the money says so. Peace.

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