Tuesday , January 19 2021
Home / Business / Museveni locks out oil investors
 Nrm Image

Museveni locks out oil investors

Details of main dispute

The main disagreements, which needs to be resolved with the oil companies stems from Total E&P and CNOOC’s purchase of majority of Tullow’s stake in Uganda’s oil fields.

The trio control 100% of Uganda’s oil fields currently under development; initially with 33% each for Tullow, CNOOC, and Total.

Tullow’s share was cut in January 2017 when it offered 21.57 % of its share for sale. Initially, the deal was to sale to Total E&P; however, CNOOC insisted on its rights and they shared the Tullow offer 50/50. That left Tullow with 11% of the oil fields.

At this stage, however, another challenge appeared. Since Tullow would stop operating its assets; the question arose around who would operate these assets.

This became contentious because, since Tullow first negotiated with it, Total E&P had already integrated these assets into its bigger project also known as Tilenga.

But CNOOC again insisted on its rights until President Museveni intervened and offered CNOOC another deal—an exploration block. That got them to surrender the operatorship to Total E&P. Then the dispute over a $ 167 million tax bill emerged. This too appeared resolved in January.

Insiders say both government and the oil companies were in the midst of concluding documentation on how this $ 82 million (exgratia pay) would be treated when yet another huddle emerged.

The oil companies want to inherit Tullow oil’s recoverable costs. Most importantly, this means that if Total and CNOOC start making income, they would not be charged tax until all these costs are deducted. The government has refused this position.

Museveni brings optimism

As the negotiation, posturing, and court cases rage, President Museveni and executives of oil companies are keeping their cards close to their chests. But industry observers are reading into anything they can find to give a sense of the direction of things.

So when on June 6 while reading the state of the nation address President Museveni said the commencement of oil and gas production and work on the oil pipeline and the refinery “will be starting soon”, it was seen as a hint of optimism.

The President also said that work on three key oil roads– Karugutu-Ntoroko and Kabwoya-Buhuka (98km), Masindi-Biso; Hohwa-Nyarongwa-Kyarusheshe-Butore and Kabale-Kiziramfumbi, and Lusalira-Nkonge (97km), would commence in the new financial year.

Stakes are high. Uganda’s ability to dig itself out of the current debt hole and guarantee future economic growth prospects have been pegged on activating oil investments by the World Bank, International Monitory Fund (IMF) and the officials at the Finance Ministry.

Indeed in the state of the nation address, President Museveni cited the commencement of oil as part of the basis for the country’s “very positive” economic growth outlook.

Despite economic growth picking up from 4.5% in 2016 to 6% since last year, it can only be sustained and possibly improved by the expected dividend from oil related investments; in infrastructure projects like oil roads, pipelines, refinery, and other oil processing facilities. This could gradually bring in some estimated $ 20 billion (Approx. Shs75 trillion).

While the oil companies will be the spenders, they also stand to make a big chunk of their money in this phase as some of the work will be subcontracted to their sister companies. Continued delays, therefore, hurt both these companies and the country.

****

10 comments

  1. Paul Kilimi Wanda

    It is said oil discovery is a curse. The reason is that business sharks want to steal oil proceedsand leave the country poorer than before. His Excellency is right though it shouldn’t take a lot of time to begine the production.

  2. We need to get going.
    In any negotiation, you can’t have it all. Lose some win some and create the win win situation. There is a bigger gain when activity starts.
    The issue stems around taxes and am disturbed to see up to the end point, it’s not clear how to deal with taxes on such a big deal.
    If this is not reviewed seriously with a business mind, nothing will be unlocked.

  3. Wilson Komakech

    His Excellent is right, make the right decision for the future.
    1 like our man, no bullying, full stop.

    • ejakait engoraton

      THIS is playing to the gallery and naive people like you

      HE is trying to appear macho but at the end of the day, these oil companies have been in the business for a very long time, and though may appear as if they are different oil companies while negotiating with the idiots and greedy people that most of our RULERS are, they are a cartel and they hunt together like a pack of wolves and they will ultimately get their prey.

      IT is just a question of them being able to pay the right price, they know very well, just like in any negotiation, each side tries to play hard, in order to extract the maximum, but they know at some point there will be a meeting point.

      AND our RULER is not playing hardball in order to benefit the country, but like he said in his statement with the KENYAN journalist, and again while giving a speech was it in Fort Portal, he is not anyone’s servant and he is working for his interests and those of his children and grandchildren. If he does anything that benefits the country, it is purely by accident or as a by product of taking care of his interests.

      SO what makes some fools think that on this particular occasion he has the interests of poor UGANDA at heart.

      ONE of the few leaders we have had who could not be compromised was IDI AMIN, whatever other shortcomings he may have had.

      DREAM ON

    • Yes His Excellence is right. Magufuli style, is the best way to go. Proper negotiations favouring the Government and Wanaichi

  4. HE, keep strong. That is the way to go. We appreciate your understanding of issues.

  5. ejakait engoraton

    IT is because of this oil that someone went to the bush leading to the killing of so many innocent people and the destruction of peoples property.

    ONE intelligence officer, then working in Obote’s presidents office, in the economic intelligence department under the now heavily rehabilitated Rwakasisi, came across information that Uganda was sitting on oil.

    IN his twisted mind, he decided then, that it would be him and him only who would preside over the production of that oil, and promptly used that information, notably from the likes of Tiny Rowland of LOHNRO to obtain financing for killing Ugandans in unwarranted wars.

    EVEN up to now , it is the reason for super gluing himself to power and as you have severally heard calling it “MY OIL” and id++ts like John, Peace, Komakekech think that he is fighting for their interests.

    Believe me, one of the reasons the oil is delaying is because it is heavily mortgaged .

    • I have it from a well placed knower that the oil will be drilled to pay (not to earn revenue) an already stashed away debt. The ‘owner’ of the oil, utilising benefit of hindsight and learning from others’ mistakes, opted to be paid first so that any fights will be against international companies; who already own it. The ‘oil-owner’ is cleverer than all people combined………….has out-foxed them again. Who said you cannot fool all the people all the time? with Ugandans it looks like it is possible.

  6. Biggness Lebowski

    Sorry to say it but Uganda will never produce any oil.

    The investors would first have to sanction a project for $20bn, to fund oil field development to production, build the pipeline and refinery.

    They would have to be insane as they would be guaranteed to lose all their investment.

    Uganda is completely uninvestable.

    But as far as the ordinary Ugandan is concerned, maybe it is for the best, the big men would take it all anyway.

Leave a Reply

Your email address will not be published. Required fields are marked *