Tullow to sue partners over oil dispute

TULLOW Oil is effectively suing its former development partner in Uganda in a bid to recover tax payments made to the country’s government.

The Irish-founded oil and gas exploration company recently gained formal approval to take over two blocks in Uganda’s Lake Albert Rift Basin, which it previously co-operated with Canada’s Heritage Oil.

Part of that change of ownership approval process saw the Irish company pay $313 million to the Ugandan government to cover tax on the fields, on behalf of Heritage Oil.

The change of ownership will ultimately see Tullow keep a third of the assets in question and sell equal shares to China’s CNOOC and France’s Total.

However, the original agreement between Heritage and Tullow contained a tax indemnity clause in the latter’s favour, meaning that Heritage needed to reimburse Tullow for any taxes charged and paid relating to Tullow’s takeover of the assets.

As Heritage has denied it is liable, Tullow has said it is seeking to retrieve the money through the High Court in London.

“Tullow has a duty to its shareholders to seek reimbursement and shift liability back to Heritage,” a company spokesperson said yesterday.

Meanwhile, Heritage was quoted by Bloomberg as saying that Tullow’s claim “has no basis in law” and that the Canadian company will vigorously defend its position.

“Tullow made a commercial decision to pay $313m to the government of Uganda for its own benefit,” Heritage said.

Tullow paid Heritage around $1.5bn last year for its share of two blocks in the Kasamene field in the Lake Albert Rift Basin, but approval was withheld by the Ugandan government until the capital gains tax issue was resolved.

Tullow recently said that a conclusion to the deal would “secure the future of oil production” in the country, with the three partners targeting production of at least 200,000 barrels of oil per day.

Tullow’s share price was unchanged at €15.77 yesterday.

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