Museveni cornered on Shs 446 bn oil money

Costly Standoff

It is still unclear how the current stand-off will be resolved.

Tullow, which has been active in Uganda since 2004, says it intends to initiate a new sales process to reduce its 33.33% operated stake.

Total’s Exploration & Production President, Arnaud Breuillac, has said despite the termination of this agreement, Total together with its partners CNOOC and Tullow will continue to focus all its efforts on progressing the development of the Lake Albert oil resources.

“The project is technically mature, and we are committed to continuing to work with the government of Uganda to address the key outstanding issues required to reach an investment decision. A stable and suitable legal and fiscal framework remains a critical requirement for investors” he said in a statement.

Uganda’s Energy Ministry has stressed that Tullow must pay Capital Gains tax before it can be allowed to sell part of its stake to Total and CNOOC Uganda.

“Government’s position is that the assessed tax should be paid in line with the laws of Uganda and tax reliefs are treated in accordance with the laws of Uganda,” said the Ministry’s Permanent Secretary, Robert Kasande, in a statement.

As the money games appear set to resume, McDade and Total SA’s Patrick Pouyanne are known for being fierce negotiators, young and robust at age 56 compared to 75-year old President Museveni who prefers drawn-out discussions of nuts and bolts.

Total and Tullow can afford to wait-out Museveni – even for 20 years. They also control the oil production and marketing value chain.

But Museveni has shown something McDade and Pouyanne possibly never considered they would encounter in African leaders of a potential oil country; Museveni’s indifference to promises of quick money. Observers of the oil industry say this could be partly because of lessons learned elsewhere where poor decision making around oil extraction has hurt more than developed economies and Museveni has surrounded himself with young technocrats schooled in oil matters in some of the world’s best universities.

Museveni has shown he does not bear bullies. In April he reportedly prematurely ended a meeting with oil executives when one of them attempted to threaten him with a deal or no deal situation. Museveni followed up that with cancellation of highly anticipated meeting on June 05 between him and oil production company executives.

It could be different this time because Museveni is being pushed by even Tanzanian President John Pombe Magufuli, whom he respects as a friend.

Magufuli told hundreds of Tanzanian and Ugandan business executives at the second Tanzania-Uganda Business Forum on Sept. 6 in Dar es Salam that Uganda should be flexible in its Capital Gains Tax demand.

With Museveni in attendance at the Julius Nyerere International Convention Centre, Magufuli cautioned his counterpart saying that, “In business, things are supposed to move.”

“You cannot get super profit; it is about sharing and giving. You have to lose a little so that you gain more,” he said, “I talk like this because it (lack of movement) really pains me.”  Magufuli spoke of business people that have already invested or got jobs.

“For us eight districts will benefit from this pipeline,” Magufuli said.

For Tullow, CNOOC, and Tullow, failure to move on with the project threatens over U.S $3 billion they are estimated to have sunk in the deal already. Local Ugandan business people have also invested heavily and borne losses. Industry watchers say, despite disagreements, this deal must be cut quickly.

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