Uganda’s hopes of earning from her oil are lying in suspense after Total suspended all its activities in the oil exploration fields. French company Total E&P Uganda suspended all activities, including tenders on the East Africa Crude Pipeline (EACOP), sending shivers among stakeholders in the Uganda oil industry.
The suspension is a result of a collpased deal where Total and CNOOC, both involved in oil exploration in Uganda, had sought to buy Tullow oil’s interests in Uganda’s oil sector. The deal collapsed after the Energy Ministry directed Tullow Oil company to pay the accumulated taxes before it can be allowed to sell part of its stake.
The suspension has thrown the Oil industry in Uganda into disarray, with insiders saying that the action will further delay the Final Investment Decision, FID. Total also decided to layoff some of its staff under unclear circumstances.
The government of Uganda has maintained its position that the assessed tax should be paid in line with the laws of Uganda and tax reliefs be treated in accordance with laws of Uganda. Government says that Tullow cannot transfer its interest without payment of Capital Gains Tax arising from the sale to CNOOC and Total, with the ministry and Uganda Revenue Authority (URA) insisting that the oil firm must pay up to it $167m (UGX600b) capital gains tax.
Uganda expected to start drilling oil in 2023, however, with the collapse of the deal, it looks like the country will have to wait longer unless an agreement is reached.