sharing in governance of extractive industries
June 24, 2011Secrecy, lack of regulation undermining oil industryBottom of Form Posted Friday, April 8 2011 at 00:00The…Continue
June 24, 2011
Secrecy, lack of regulation undermining oil industryBottom of Form
Posted Friday, April 8 2011 at 00:00
The developments in Uganda’s oil industry are turning out to be a classic parody of an oil kleptocracy in the country. The government has continuously fed the public with a deceptive lustrous emerging industry, yet it continues to engage international oil companies in questionable transactions.
It all started in 2004 when Tullow Oil acquired South Africa-based Energy Africa’s interests in Uganda at a paltry $570 million. It also acquired Australian-based Hardman Resources interests in Uganda at $1.1 billion in September 2006. Both transactions were not taxed by the government of Uganda, yet the Income Tax Act provided for a Capital Gain tax.
In 2010, the Government of Uganda got itself entangled in an avoidable tax dispute between Heritage and Tullow worth $404 million originating from 1.45 billion acquisitions of 50 per cent interests of Heritage in the oil wells in the Albertine Graben, giving Tullow Oil 100 per cent stake. All the above could have been avoided had government heeded expert advice to suspend all oil transactions and first lay a harmonious policy and legal framework that would institutionalise the sector. Amidst this confusion, the President instructed that no oil deal was to be concluded without his consent.
In March 2011, a beaming Minster of Energy and Mineral Development appeared on state television flanked by the head of Uganda Revenue Authority and proudly but falsely declared that the standing dispute between Tullow Oil and the Government of Uganda had been resolved with Tullow agreeing to pay all the outstanding debts owed. More drama unfolded at a press conference in Kampala held by Tullow Oil on March 31 when it, in essence, admitted to have been compelled by the Government of Uganda to deposit $313.4 million in 10 days if the government was to endorse its planned farm-down of 1/3 of its interests to CNNOC and Total at a cost of $2.93 billion accruing a capital gain tax of $472.7 which, according to London (Dow Jones –Newswire), the Chief Executive Officer of Tullow, Aidan Heavey, admits is money owed to the Government of Uganda, yet his operations manager in Uganda disputes and now seeks the intervention of the Tax Appeals Tribunal.
In essence, the Government of Uganda abandoned an unresolved tax dispute just to deliberately enter into another. The reason advanced by Tullow Oil for disputing the current tax dispute is lack of adequate petroleum laws. While the government was quick to pass the Cultural Leaders Bill into Law before the elections to subdue cultural leaders, the Petroleum (Exploration, Development, Production and value Addition) and Revenue Management laws have been shelved to enable government continue secret deals that have not been sanctioned by Parliament.
One is left wondering the wisdom, expertise and or intentions of government representatives in the conclusion of these dubious transactions. Why is the government defying all expert advice and is in such a hurry to continue sealing deals in an unregulated industry? Where is the accountability for the $121 million paid by Heritage and the $141.8 million recently paid by Tullow?
Could this be evidence that the oil cancer is already eating up our own political fabric?
Mr Bwesigye is A Minerals, Oil & Energy Justice Advocate