UPDATE: Uganda Oil Drill Plans To Stay On Schedule Despite Tax Spat-Official

23rd Jun 2010 19:46

(Adds Heritage comment) By Nicholas Bariyo Special to DOW JONES NEWSWIRES KAMPALA, Uganda (Dow Jones)-Oil drilling plans in Uganda's Lake Albert basin will remain on schedule despite the ongoing dispute over capital gains tax on the proposed sale of Heritage Oil PLC's (HOIL.LN) half stakes in two oil blocks, the head of Uganda's Petroleum Exploration and Production Department said Wednesday. Companies operating in the oil-rich basin have agreed to work plans that they must keep to as the government and Heritage continue their efforts to resolve the dispute over the capital gains tax on the proposed $1.5 billion deal, Ernest Rubondo told Dow Jones Newswires. "There are penalties for failure to implement the work plans," he said, adding that Heritage Oil has already imported another rig for drilling in exploration area 3A, located at the southern tip of Lake Albert. At least a billion barrels of oil have been discovered in the three exploration areas and plans are underway to start oil field development. However, the government has yet to sanction any new players in the oil sector despite interest from majors like China's Cnooc Ltd. (CEO, 0883.HK), France's Total SA (TOT, FP.FR) and Italy's Eni SpA (E, ENI.MI), Rubondo said. "We are still negotiating and the government will make a decision once we are satisfied that the interested companies adhere to our development plans," he added. Uganda expects to start commercial oil production in the next three years with initial daily output projected at 150,000 barrels, according government and company officials. Tullow Oil PLC (TUWOY, TLW.LN) wants to take over Heritage's stakes in two blocks, which will give it a 100% ownership of all the three blocks where Uganda's commercial oil reserves have been confirmed. The company has already presented its partnership terms with Cnooc and Total to the Ugandan government for the development of the fields. However, the Ugandan government has declined to approve the partnership, demanding that the parties first sign a binding agreement. Company officials declined to comment. In a bid to secure the government's approval, last week, Heritage offered to deposit $108 million with the Ugandan Revenue Authority and refer the tax dispute to an arbitration court in London. That proposal has been rejected by the government, according to Hilary Onek, Uganda's Energy and Minerals Minister. However, a Heritage spokesman said separately that the company has yet to be notified formally of government's final position on the matter. "Government spokespersons have given sound bites to media on Friday and Saturday but there has been no formal response to Heritage yet," he said in an emailed statement. -By Nicholas Bariyo, contributing to Dow Jones Newswires; 256-75-2624615; [email protected] (END) Dow Jones Newswires June 23, 2010 14:46 ET (18:46 GMT)