UPDATE: Heritage Oil Asks Uganda For Arbitration In Tax Dispute

17th Jun 2010 16:27

(Adds comment from Ugandan official.) By Jeffrey Sparshott and Nicholas Bariyo Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Heritage Oil PLC (HOIL.LN) Thursday said it would seek arbitration to resolve a tax dispute with Uganda's government that is holding up the sale of stakes in two oil blocks to Tullow Oil Ltd. (TLW.LN). "Heritage has proposed that the outstanding tax dispute be submitted to binding arbitration in London and has offered to deposit $108 million with the Ugandan Revenue Authority on its receipt of the cash consideration of $1.35 billion on closing, which would be refunded to Heritage if it is ultimately determined that no tax is payable," Heritage said in a statement. Two Ugandan officials said they had not seen the proposal, though the initial reaction to Heritage's announcement was cool. "Its not (for) Heritage to tell us how to go about our business. We shall respond to them once we get their communication," said one government official, who asked not to be named. Heritage has agreed to sell its 50% stakes in blocks 1 and 3A of the Lake Albert basin to U.K.-based Tullow for up to $1.5 billion. The transaction has been awaiting government approval since January. The purchase of Heritage interests will allow Tullow to hold a 100% stake in three blocks where close to a billion barrels of oil have been discovered. Tullow has already presented its partnership terms with China's Cnooc Ltd. (CEO) and France-based Total SA (TOT) to the Ugandan government for the development of the fields. "The only issue preventing approval from being granted is the absence of an agreement between Heritage and Government with respect to whether the disposal of the assets is taxable in Uganda," Heritage said. Ugandan officials maintain the sale is subject to a tax of about $360 million, but Heritage Thursday said that the disposal of the assets is not taxable in Uganda. Heritage has proposed that the dispute be sent to the United Nations Commission for International Trade Law, or UNCITRAL, for arbitration. At 1523 GMT, Heritage's shares were down 13 pence, or 2.8%, at 458 pence, underperforming London's oil and gas sector. -By Jeffrey Sparshott, Dow Jones Newswires; +44 (0)207 842 9347; [email protected] (END) Dow Jones Newswires June 17, 2010 11:27 ET (15:27 GMT)