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Who are the main international oil companies in Uganda?

The overall pattern of recent international oil company involvement in Uganda has been a progression from rather small fish to giant companies.

Several relatively small companies started explorations in the late 1990s, and during the 2000s some of these companies changed hands or sold on their licences to others.  (See our TIMELINE  for more details.)  Commercial quantities of oil were discovered in 2006 in exploration blocks that were jointly licensed to the Anglo-Canadian Heritage Oil and the Anglo-Irish company, Tullow Oil PLC. Tullow, at that time, was a relative newcomer to Uganda and the largest of the companies involved in exploration. Heritage decided to settle for a quick profit by selling its stake in what had, with the discovery, become a much more valuable prospect.

Heritage offered to sell the stake to the Italian company, ENI, but Tullow decided to exercise its pre-emptive right to buy the stake at the same price ENI had offered—US$ 1.5 billion. Tullow then needed to bring in even bigger oil company partners with more financial resources to invest in production.  (It is estimated that around US$ 10 billion will be needed.) Tullow’s chosen partners were Total SA, a French ‘oil major,’ and the China National Offshore Oil Corporation (CNOOC), which each agreed to pay US$ 1.45 billion in a deal that would give Tullow, Total and CNOOC an equal stake in the areas once jointly prospected by Tullow and Heritage.

This overall process—of smaller explorers prospecting for finds and then bringing in bigger companies—is not unique to Uganda. It is, rather, a quite familiar pattern in global oil exploration and production.

The deal-brokering in Uganda, however, was marred and delayed by a tax dispute.  The Uganda Revenue Authority (URA) presented Heritage with a US$ 404 million bill for capital gains on the sale of its assets to Tullow.  Heritage challenged the capital gains tax assessment.  They paid one third of it (US$ 121.5 million) to the URA in July 2010 and deposited two-thirds (US$283.4 million) in an escrow account in London—the idea being that those funds would go to the government of Uganda only if a London tribunal supported the URA’s claim to the money.

But the government of Uganda refused to approve the Tullow-Total-CNOOC deal until the full amount of the tax was paid.  In April, 2011, Tullow paid the outstanding sum to the URA , on behalf of Heritage  (and then sued Heritage, in the UK, to recover the money.)

Even then, however, the Tullow-Total-CNOOC deal was not finally completed until February 22, 2012, after the government had renegotiated Production Sharing Agreements with Tullow.

Tullow still remains in dispute with the government of Uganda over the amount that it owes in capital gains tax from the sale to Total and CNOOC.   The government has billed Tullow for US$ 472.7 million, an amount that is disputed by Tullow.   In line with normal tax dispute resolution processes in Uganda, Tullow has paid one third of the disputed sum;  a tax tribunal in Kampala will decided how much more it must pay.

See also the OIL PLAYERS section of this site.