Uganda Won't Budge On Tax Dispute With Heritage - Minister

29th Jun 2010 11:59

KAMPALA, Uganda (AFP)--Uganda said Tuesday it won't allow Canada's Heritage Oil Corp. (HGOCF) to sell its share of the country's oil reserves until the company agrees to pay a 30% capital gains tax. Heritage has for several months been trying to sell the deposits it controls to London-listed Tullow Oil PLC (TLW.LN) for $1.5 billion. "The government insists that tax must be paid at 30%," Simon Dujanga, Uganda's state minister for oil, told AFP. "We will not accept less. These taxes are due." Heritage and Tullow, two small exploration companies, have discovered an estimated 2 billion barrels of crude in Uganda's Lake Albert region. In January, Uganda signed off on a deal allowing the Italian major Eni S.p.A. (E) to buy the Heritage reserves, but the government was forced to reverse that decision when Tullow invoked its preemption right. Tullow's purchase of the Heritage reserves should have been concluded in April, Uganda previously said, but the deal has been delayed indefinitely because the government and Heritage are refusing to budge on the tax issue. "Heritage is still disputing and we are standing our ground. They want to go to arbitration. We don't mind going to arbitration, but it will be in their interest to pay the tax," Dujanga said. Heritage, according to Dujanga, has insisted it shouldn't be bound by Ugandan tax law as modified in 2008, because the company began work here long before then. Dujanga conceded there was no capital gains tax in Uganda when Heritage first entered Uganda, but dismissed their claims for exemption. "This is 2010," he said. Oil production, including the construction of a refinery expected to churn out roughly 150,000 barrels a day, cannot begin until the Heritage deal is complete. Dujanga said Uganda has demanded that Tullow immediately farm down after it acquires the Heritage reserves. "Not even a day. Not even a second. Farm down immediately. We don't want a monopoly," he said. Uganda would accept a deal that saw Tullow sell 33% of its reserves to France's Total SA (TOT), and another 33% to the Chinese state controlled giant CNOOC Ltd. (CEO), according to Dujanda. But, the minister insisted, no deal has been approved yet and other companies could be brought in, including Eni, if additional capital is required. (END) Dow Jones Newswires June 29, 2010 06:59 ET (10:59 GMT)