Shares in the UK-based oil and gas exploration company Tullow Oil briefly leaped after the Ugandan government said that it has reached agreement on a tax dispute which had stalled a longstanding attempt to reduce its lucrative stake in Ugandan fields. Although the shares later relapsed on as a result of broker downgrades, this is seen as a significant strategic development.
Tullow had been forced to put on hold a tentative agreement to sell the majority of its stake to its joint venture partners, Total and CNOOC over a dispute relating to Capital Gains Tax and the transfer of tax deductions in the event of a change of ownership. Without giving precise details of the concessions made, a spokesman for the Ugandan government says it has made an offer to end the dispute and that the firms “have now accepted that proposal and are moving on to ensure that package of proposed terms is “operationalised.” He adds that he expects a deal to be agreed by the end of the first quarter of 2020.
The Lake Albert project in which Tullow wishes to sell a 22% stake is one of the largest in East Africa, with an estimated 1.5 billion barrels of oil equivalent (boe) and an expectation that at full capacity it will produce around 230,000 barrels per day. Tullow has been looking to raise around US$900m from the disposal. Such a sum would enable Tullow to develop to proceed and aid Tullow’s plans to develop its acreage, where it has recently had hitches in Ghana and Guyana.