Category Archives: Oil

Zanzibar and Mainland Tanzania in dispute over oil and natural gas exploration

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Reports Leo Odera Omolo.

Reports appearing in local media revealed that Zanzibar has triggered fresh confrontation and dispute with the union government over what it calls unnecessary delays in the removal of oil related matters from the Union Article established in 1964. The country has yet to confirm the commercial viability of the recently discovered deposits, though.

The Article of the Union is the document establishing the United Republic of Tanzania – – uniting the then Tanganyika {mainland} and Zanzibar {Isles}, which came into effect on April 26,1964.

The Article, approved by the then President Julius Kambarage Nyerere {Tanganyika} and Sheikh Abeid Amani Karume {Zanzibar}, lists matters falling under the union government, which apart from oil, includes finance, international affairs, defense and security. higher education, and home affairs.

The media report quoted Ismail Jussa Ladhu, the Deputy Secretary-General of the Isles main opposition party, the Civic United Front {CUF}, as having told newsmen that Zanzibar expected President Jakaya Kikwete’s government to resolve the matter in a timey fashion.

Jussa Ladhu, who is also sits in the Union Parliament representing Stone Town constituency, said that after Zanzibar’s House of Representatives passed the Bill approving the matter, the Chief Minister of Zanzibar wrote to the Prime minister of the Union on the issue, ”but nothing has been done.”

“The government’s slowness is preventing the Zanzibar government from undertaking any substantial decision on oil and natural gas exploration across the Isles,” he said.

It is estimated that the on-going oil exploration could take up to seven years to complete.

However, a source, close to the Zanzibar President’s office, is reported to have said that the semi-autonomous government has continued to restrict exploration companies from carrying out activities regardless of their possession of operational licenses.

Zanzibar would like to see oil produced offshore, onshore and in deep sea under Block 8-12 managed solely for the benefits of the Isles

Under the existing petroleum Act of 1980,Tanzania Petroleum Development Corporation {TPDC} is the only body mandated to license, monitor, and supervise exploration and production of oil and natural gas on the entire territory of Tanzania – – Zanzibar included – – whether offshore, onshore or deep sea.

However, for a number of years, Zanzibar politicians have been expressing discontent over TPDC’s monopoly power over Zanzibar, on the grounds that its establishment did not satisfy the requirements of bodies meant to cover both the Mainland and Zanzibar.

A Minister of State in the Vice President’s Office Responsible On the Union Matters, Samia Suluhu Hassan, was quoted by the influential Weekly the EASTAFRICAN this week as saying that the removal of oil and natural gas from the list of Union matters was being dealt with by “higher authorities” and therefore was no longer being discussed in the inter-sector meetings that review Union challenges periodically.

The latest meeting took place on March 19, 2011, Hassan said, adding that the resolution of the matter is long over due.

Exploration carried on by Antrim Energy of Canada shows that the Pemba-Zanzibar block has a proven hydrocarbon system as evidenced by Tandaua oil seep on Pemba Island, and oil shows in previous exploration wells. Multiple source rocks and petroleum reserves are anticipated and numerous projects mapped.

There are 17 oil and gas exploration companies carrying out exploration in Tanzania, mainly in the deep sea and along the coastal areas.

Ends

World: Wikileaks of US cables, Saudi Oil, peak oil;

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From: octimotor

Those of us, who care to take notice, have been aware that sometime or another, in order to keep our civilization’s future economy going, we will need abundant energy sources to substitute for natural gas and oil. Here, as listed on the site, Earthfiles …, is a summary and citations. One part relates to Wikileaks, US diplomatic cables, concerning over-stated Saudi oil reserves. Another, is a link to an academic’s report on the world’s need for oil substitutes.

– – – – – – – – – – –

http://www.earthfiles.com/

February 9, 2011 – Latest Wikileaks Revelation in The Guardian –
Saudi Arabia Oil Output Dropping and 2012 Fuel Prices Could Soar.

February 8, 2011, headline in The Guardian, one of the
authorized media distributors of leaked U. S. embassy cables
from whistle blowers to Julian Assange’s Wikileaks.

Reinforcing the leaked cables about Saudi Arabia’s oil supply lower than publicly reported, only a year ago in March 2010, “The Peak of the Oil Age” was published in Energy Policy by Prof. Kjell Aleklett, Global Energy Systems, Uppsala University, Sweden, that concluded: “… future growth in (worldwide) gross domestic product (GDP) must be dependent upon fuels other than oil if GDP is to continue as expected. This, in turn, defines the beginning of the end of the “Oil Age,” and society will have to seek other driving forces for future GDP growth. In all our projections, future oil production by 2030 will have decreased from present levels. The world appears most likely to have passed the peak of global oil production and to have entered the descent phase. If this is the case, then the world has reached the “Peak of the Oil Age.”
Also see: February 8, 2011 The Guardian.co.uk.

http://www.tsl.uu.se/uhdsg/Publications/PeakOilAge.pdf

http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V2W-4XTYD56-2&_user=10&_coverDate=03%2F31%2F2010&_rdoc=1&_fmt=high&_orig=gateway&_origin=gateway&_sort=d&_docanchor=&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=a6e70f3aabd0981d84e7f1a1fe468e38&searchtype=a

DRC & Uganda: Wildlife and conservation groups are up in arms against oil exploration inside Virunga national game park in the DRC

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Writes Leo Odera Omolo.

Reports emerging from the Ugandan capital, Kampala says that wildlife and conservation group in the United Kingdom as well as the United Nations are seeking to block plans by UK listed oil companies to drill oil in the world famous Virunga National Park in the Democratic Republic of the Congo.

The two oil firms listed by the Financial Times Stock Exchange, Soco International and AIM listed Dominion Petroleum, were granted block 5 of Congo’s Eastern Albertine Graben last year.

The DRC shared the Abertine Graben with Uganda’s oil rich Western region. The two countries jointly owned Lake Albert on 60 -40 per cent basis, though more oil fields have been discovered on the Ugandan side of the border inside Lake Albert.

Part of the block 5 is based inside Africa’s oldest national wild game park, a world heritage site famous for its endangered Mountain Gorillas.

But the two companies say the gorillas are not present in their block and further insisted that the animals are right inside the Mountain Park and face no threat from human contact.

DRC law forbids oil exploration and production within the national game park, although Endando , the DRC Environment Minister was recently quoted by a British Newspaper, the FINANCIAL TIMES that Congolese government was in the process of considering a request from 42 local MPs to redraw the boundaries of the park to enable the “rapid start” of oil exploration” at the heart” of the block 5.

DRC produces 28,000 barrels of oil a day from its western shorelines, but discovery of large quantity in neighboring Uganda by Tullow Oil has encouraged oil companies to look for oil elsewhere in East African region.

However, UNESCO says in its parts that oil activities are “inappropriate” and” not compatible with world heritage status.

Conservation group WWF adds that Soco is acting with “total disregard” and calls the plan “pernicious,” claims denied by the company who according to FINANCIAL TIMES, have received death threats over the issue.

At one time, DRC and Ugandan forces exchanged fire over one disputed oil rich Island located inside Lake Albert, which is said to be located right inside the Ugandan side of the Lake Albert and the situation threaten to ignite and developed in to a full scale conventional war. A British oil worker and several Ugandan colleagues died in the brief skirmishes, but the incident was resolved amicably through intensive diplomatic engagement between the two countries.

Meanwhile an Irish Oil giant involved in exploration activities in Western Uganda has disclosed that the final approval by the Ugandan government for a key USD 10 billion project should come shortly, although Tullow, however, gave no specific date and its profits missed forecast.

Tullow has been waiting since last year for the formal approval from the Ugandan government to bring in new partners, French Total Group and Chinese CNOOC to start a major development in Uganda.

‘We’re at the stage where all the points have been agreed so we are just finalizing the documentation,” the Reuter News Agency yesterday quoted the company’s CEO Aidan Heavy as saying this in the firm’s London head office.”It should be pretty quick.”There is bn9thing there to stop it going ahead now. We just have to wait and see what happens in the next few weeks.”

The same reports from London says shares in Tullow oil slid in the London Stock Market as much as 3 per cent before paring earlier losses to trade down on Wednesday morning this week. They also disappointed on their results as well as reported by the Royal Bank of Scotland’s analysts.

Tullow Oil has reported the full-year pretax profit stood at 36 per cent to USD 1.52 million in 2010, but the result fell short of consensus market forecasts and projection of USD 1.92 million according to the company supplied poll of around 20 analysts.

Ends

leooderaomolo@yahoo.com

Uganda: Nation has shelved its plans to an oil pipeline and opted for a refinery instead

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Reports Leo Odera Omolo

REPORTS emerging from the Ugandan capital of Kampala say that country has now shelved plans to transport its crude oil using a pipeline through either Kenya or Tanzania.

This decision is based on a study that established that laying a 1,325 kilometer pipeline to transport the crude would be more costly, at USD 2 billion than building a phased 120,000 barrels per day refinery which would cost only USD 1.6 billion.

Some industry analyses argue that Uganda will suffer from excesses capacity of crude with a small local market for the products.

“I against building a refinery that exceed local demands. There should be a balance between the local demand and the refiner”, Mr. Joel R .Couse, the vice president for Total SA market analyst, was quoted in the local media as having said this.

Uganda’s demand is 11,000 barrels per day {bpd} and this figure is expected to each 15,000 bpd against the proposed refinery’s 120,000bpd at its full capacity.

An expert from the petroleum and exploration department of the Ministry of Energy said appraisal is still going on more fields with oil deposits will be found. This will leave the country with excess crude oil that need not to be refined.

Official in Kampala estimates put the reserves a2.5 billion barrels of oil and are projected to reach 5 billion barrels, which would be more than adequately provide East African states energy and fuel supplies for the next 20 years.

An expert from the Kenya Oil Pipeline Corporation Ltd, a government parastatal has encouraged Uganda to use the pipeline option, saying KPLC is reliable, has a right of way in the region and is cheap with a lower than 5 per cent tariff.

Ends

UGANDA & KENYA: THE DISCOVERY OF OIL DEPOSITS IN THE NEIGHBORING UGANDA WILL INCREASE THE VOLUME OF BUSINESS ACTIVITIES IN KISUMU CITY.

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Report compiled By Leo Odera Omolo In Kisumu City.

The discovery of the crude oil of commercial value and the proposal to build oil refinery in Uganda will spur refined oil trade to serve the regional industries around the Lake Victoria. Port Bell {Luzira} in Uganda will be the refined oil loading port and Kenya government and Counties have to make alternative arrangement for handling oil cargoes at selected ports.

It is preferable to construct these facilities in ports and beaches with deeper depths such as Port Victoria, Misori, Mbita and Muhuru Bay. The Eastern part of the Nyanza Gulf beyond Mbita is shallow and as such cannot take heavy laden tanker vessels drawing larger drafts.

The Central government of Kenya and its Counties must put in place contingency plans to respond to Search and Rescue oil spills in the lake while oil spill contingency plan will respond to oil pollution in the lake. Contingency plans will also details personnel and resources needed for effective response to these emergencies. Marine personnel will be given special training in line with the requirements of the contingency plans.

Kisumu Airport is currently being upgraded to international standard and is the main airport in the region. International flights will come to Kisumu Airport with many passengers and cargoes. So the region must be ready to provide services to the increased flow of passengers and cargo. Tourism will be boosted and facilities must be put in place for the comfort of tourists.

Apart from Kisumu Airport, the region has airstrips in Busia, Siaya, Homa-Bay, Migori, Rusinga and Mfangano Islands which can be served by smaller planes. These airstrips must be maintained and made accessible to enable passenger reach ports and beaches for boarding vessels.

When all trunk ring roads around lake are competed and access roads to the beaches and ports made all weather roads, the region will be able to provide transport system which will spur economic growth.

The strategy set in Capt Odhach contention for tapping the economic potential of the waters of Lake Victoria entail the use of boats/vessels and other water crafts. The labor that will be required to operate the vessels will require special training which is not in local schools and colleges curriculum. Lake Victoria Basin Commission had lid down the type of trained marine personnel to serve in ships. Kenya Marine Authority has the training schemes for the marine labor. The government and Counties have to pool resources and set up special training institutions for boat operators.

Marine personnel serving on board of vessels must undergo mandatory training which is only offered at Dar Es Salaam Marine Training Institute in Tanzania. The professional cadre of marine engineers and nautical officers can access their training in colleges and universities in Kenya. It is paramount importance tat a regional training institutions for Mandatory Training be established in the region for the training of fishermen, boat operators, and seafarers.

Kisumu City is ideal location for setting up training institution as it has many facilities and amenities. The risk management marine personnel must undergo personal survival techniques, social responsibility, First Aid and Fire fighting. Engineers and navigating officers have to undergo proficiency training to ensure safety of navigation and vessels. There are many boat accidents all over the world which necessitated proper training for all marine personnel aboard ships.

The local Counties in collaboration with the Kenya Marine Authority and Lake Victoria Basin Commission have to prepare contingency of the plans are Search and Recue and Response to oil Spill. Personnel must be trained and drilled to respond to these accidents.

Ends

Leooderaomolo@yahoo.com

Israel & Latvia: Israel gearing up to export natural gas

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from Richard Brodsky

Greetings!

Great News about Israel’s discovery of natural gas. Israel may soon be exporting natural gas not only from the Tamar site but the newly discovered Leviathan site. In 2009 when the Tamar site was discovered it was the largest natural gas find for the year. The Leviathan site discovered on December 30 is twice the size of the Tamar site. There will be numerous problems exporting the natural gas but at least Israel will be energy independent except for its need for oil. It’s hard to imagine how one tiny country could be so richly blessed with so much natural gas. Considering that Israel does help Kenya with irrigating its land, improving public health and providing advice to Kenya on combating terrorism, what a great opportunity if Israel would have more resources to help Kenya.

http://www.chabadgn.com/templates/articlecco_cdo/aid/1397417/jewish/Noble-CEO-Leviathan-is-largest-gas-find-in-our-history.htm

World: Climate summits, technologies, economic institutional philosophies

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The world political scene has had several climate summits. The most recent one was held in Cancun, Mexico, ending last week.

Under the new, green technologies angle, a related article appeared in NewVisions, a Ugandan publication, authored by UK independent journalist, Gwynne Dyer, titled “New technologies solution to climate change”

– – – –

Gwynne Dyer wrote:

Wind turbines, solar panels and the like tend to be more expensive than cheap and dirty coal-fired power stations. If the developing countries choose the more expensive option, who pays the difference? The old rich countries who landed them in this dilemma, of course.

People in the rich countries do not even understand that history, so they are still a long way from accepting that deal. It might be years before it happens. May be too many years.

– – – –

Today, politics, climate, rich vs poor countries and economic development, are all blended together into a poor quality soup.

On its face, it is a relatively good thing to promote shifts in technologies away from our current Age of Petroleum and Coal fuels.

A leading premise strongly debated in today’s forums is whether human industrial exhaust of green-house gasses is The Decisive Part of climate change across our planet. A majority of spokespersons in the already developed world proclaim loudly YES to that idea. The USA political conservatives shout back, NO, That is Fraud!

You can also find some astronomers in the planetary sciences field who detect that global climate change is currently observable at places such as Mars or Uranus as well as our own planet.

My perspective is that of a person who has for decades been a fan for both alternative energy technologies, and economic development / industrialization of our surrounding solar system. That leads to the ideas in which such enterprises would be coping on a very large scale with human habitation activities surrounded by environments very different than what we take for granted on the ground in many nations on this planet today. Built environments, “Closed Cycle environments & life support systems”, (CELS), are thus an important conceptual aspect, if such endeavors would be economically viable. The concept arises when we start to think about large scale economic development activity in locations near some of the asteroids, for example.

The carry over of such ideas may be important in situations where earthly food crop harvests must be kept going, even if temperature ranges and precipitation features at the selected agricultural geographical locations might shift away from what have been recent past historical averages and visibilities. How to do so at large scales quickly and avoidably thus should become a high priority topic to be supported and pursued by many institutional entities Those entities may span the whole spectrum from individuals, companies, and on up thru UN agencies or their contractors.

In the era prior to the late 1930-s through WW-2, and afterward, for USA / Europe / Japan / China, centralized national governments dominance in technologies innovation and science research support (strongly steered by national security / military motives) was not the big thing that it is today. Also, nearly 10 decades in the past, business planning, with the future in mind, not ignoring things further away than the coming 18 months, was much more in style than it currently is in USA economic culture. Hence today’s grid-locked, blame-fingers-pointing, calls on national / international governmental entities to Save Us From Doom, need not be the only way for things to go forward from now.

In his X-Files USA TV series and film produced by Chris Carter, an interesting slogan is displayed. “The Truth Is Out There”. Perhaps some diligent investigators, shining light into the shadows, and even looking for things hidden in plane sight, should be encouraged to search for, attempt to shake loose, certain rumored New Physics, Exotic Technologies, which may be sitting on rather dusty and shelves. Concerned and enlightened, publicly spirited outsiders, may deserve access to such things.

A technology milestone prise was won a few years ago. The Voyager airplane became the first ever to fly around the world non-stop without taking on more fuel. One of the science fiction authors, perhaps Jerry Pournell, quoted a video news clip filmed upon its landing. One of its 2 crew members walked back to the plane, placing a hand on it, then said, “this is what free persons do”.

– – octimotor

Uganda & Italy: Italian oil giant Eni is still interested in having stake in the Ugandan oil fields

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Writes Leo Odera Omolo

ITALIAN oil giant, Eni Spa, is still interested in venturing into Uganda’s oil fields, stiffening competition in the nascent oil and gas industry.

Experts predict this will offer strong investment opportunity for the industry.

The Milan and New York listed firm is expecting to meet President Yoweri Museveni to restore their interest to play a significant role in the development of the oil sector in Uganda.

“Your request to seek appointment to see His Excellency was forwarded to me by his principal private secretary to coordinate the meeting,” Hilary Onek, the energy minister, stated in a letter dated November 10.

T

Scaroni’s Eni is still interested and hopes to be linked to the president by Onek

he letter was addressed to Paolo Scaroni, the Eni Spa chief executive officer, but also copied to the principal private secretary to the President and Eng. Claudio De Scalzi, the Eni chief operating officer.

“I have now requested H.E to meet you any day at his convenience and will communicate to you after confirmation from his office,” the minister’s letter added.

“I am glad that you have continued to show interest in our country,” Onek stated.

This will not be the first time this major integrated energy company is expressing desire to participate in Uganda’s oil and gas industry.

The Rome headquartered company was the first to enter into a sales and purchase agreement for the acquisition of Heritage’s 50% interest in blocks 1 and 3A at $1.35b.

However, Eni had to legally “withdraw” from the transaction after another UK firm, Tullow, a 50% co-owner of the blocks, pre-empted the deal, which was perceived in some quarters to send a contradictory message.

Eni’s desire to re-engage Uganda comes at a time when Tullow is embroiled in $404m tax dispute with Uganda.

Uganda blames Tullow for paying Heritage $1.5b without approving its consent.

The Government has not renewed Tullow’s recently expired licence for block 3A.

Eni’s interest, however, is not limited to this block, but also to any other unlicensed exploration blocks competent authorities see as fitting their hydrocarbons development intentions.

Uganda’s oil and gas operations are moving into the development and production stages, which require the necessary risk capital, access to project finance and long-term investment.

Power generation and transmission facilities may cost $300m, oil processing and transportation equipment $1.5b, refinery development $2b, further drilling $200m and expanded storage and pipeline infrastructure $4b.

Uganda wants to license several oil firms to avoid a monopoly.

The firms must also support the Government’s development strategies, including early commercialisation of the oil resources, value-addition and training of Ugandans in oil-related activities and processing.

This calls for a strong operating experience in refining and pipeline development, which, experts say, Eni has developed over the years.

Uganda has confirmed significant oil reserves in the Lake Albert basin.

It is estimated that the basin has 2.5 billion barrels of commercially-viable crude oil. Oil production at peak will produce around 200,000 to 300,000 barrels of oil per day.

At the current prices of about $72 per barrel, Uganda could earn about $2.5b in oil revenues alone that could equal the current government revenues.

Already, the country is in the process of soliciting investors to build a refinery and associated pipelines in efforts to add-value and create jobs opportunities.

Uganda: Americans want value addition to Uganda’s oil Resources

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Writes Leo Odera Omolo

THE US has applauded Uganda’s stance to build a refinery in efforts aimed at benefiting from the commercially-confirmed crude oil.

“Value-added production, such as refining, produces jobs and infrastructure that wouldn’t exist if Uganda only piped out its crude,” Jerry Lanier, the US envoy, said.

“While economic realities and market scale coupled with political imperatives will determine the final balance of how production occurs, this stand will ensure that Uganda gets some additional benefits from its oil.” This was in a speech read by Donald Cordell, the commercial and economic officer, at a three-day energy governance and capacity initiative conference in Entebbe recently.

The remarks come at a time when Uganda has decided to ensure that a local refinery to process 150,000-200,000 barrels of oil per day should be built in Hoima after studies confirmed the viability of the project.

This will ensure that jobs are created for Ugandans and local energy demand, like petrol, kerosene and diesel, are met rather than exporting it to Mombasa, which the relatively small oil companies are advocating for.

However, the US ambassador pointed out that the Government must ensure that the collected revenues are used to transform Uganda’s economy and encourage broad-based investment.

“Invest in energy infrastructure so businesses do not have to pay exorbitant power tariffs.

“Educate your people so businesses will hire Ugandans not only to do physical labour, but also as engineers, scientists, managers and other high-value jobs.”

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Uganda: Search for oil in West Nile Region of nation is progressing well

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Reports leo Odera Omolo

THE hunt for oil and gas in the West Nile is progressing well, Neptune Petroleum Uganda, the firm that is conducting the exploration, has said.

The firm also revealed last week it would soon release results of the recent aero-gravity gradiometry survey that sought to gather more definitive information on the earth basement.

The study, completed in June, was commissioned to specifically identify structures with more prospective oil reservoir properties.

This was after the firm hit two dry wells in its previous drilling attempts. The ‘dry’ wells are Iti-1, which was drilled in June 2009 and Avivi-1, which was in February drilled to a depth of 764 metres, but did not encounter any oil.

However, further analysis of the data from the two wells confirmed the ‘generation and migration’ of oil in the exploration area. This development prompted Neptune to hire a team of experts from the British geo-physical survey firm, ARKeX, to do a more scientific study.

Tower Resources plc, a London-based oil and gas exploration company that owns Neptune, said a final interpretation of the data that was collected is expected at the end of this month.

Also, around this time, planning for a subsequent seismic survey will be finalised, the firm said. “This update confirms that current operations are on schedule.

“The quality of information being obtained is likely to enhance interpretation of the Uganda licence,” Peter Kingston, the Tower Resources chairman, explained

The seismic interpretation would also provide the basis for selecting a third well location, Kingston added. Previously, Kingston said, the target was to be ready to drill a third well, the commitment well, as designated in the production sharing agreement, in 2011.

This would, by design, allow time for a follow-up programme, if required, since the firm’s current licence expires in March 2012

Ends

Uganda: Museveni warns oil companies to pay their taxes or else they will not be tolerated

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Business News By Leo Odera Omolo

THE Government will not tolerate foreign oil companies evading taxes, President Yoweri Museveni has warned,the government official mouthpiece the NEWVSION reported this morning.

In his first public criticism of the multinational oil companies operating in the Albertine Graben, Museveni emphasised that the companies had no option but to pay all taxes due to the Government.

“We have made it clear to the oil companies operating in Uganda that all the taxes due to the Government of Uganda must be paid. Also the other development programmes in the petroleum sector must be fulfilled,” he said, according to a statement from State House.

To make his point clear, the President also mocked pessimists who argue that oil could turn out to be a curse rather than a blessing, as it has been in many other African countries.

He asserted that oil has been a curse where weak African leaders have failed to check the “greed” of western companies.

This will not be allowed to happen in Uganda, the President told NRM delegates at the opening of the party’s second national conference at Namboole stadium on Saturday.

He cited the Canadian-owned, Heritage Oil Company, that is yet to pay $405m (about sh810b) to the Uganda Revenue Authority.

The company is contesting the tax on the sale of its stake in oil wells in western Uganda to Tullow Oil Company at $1.45b.

“Recently, we had a problem with some of the oil companies that were trying to refuse to pay our taxes,” he narrated.

“A company called Heritage spent $130m in exploration. When oil was found, they decided to sell their shares for which they received $1.45b – more than ten times what they spent. We required them to pay us 30% of this as tax. It translates into $430 million. They, however, refused to pay.”

The President reiterated that revenue from oil will be spent on developing infrastructure like roads, the energy sector, and build an excellent railway network.

The rest will be used to fund science, technology and research initiatives as well as innovation, he explained.

“The oil money will never be used for consumption,” said Museveni.

The Government has largely kept its contracts with the oil companies a secret but the tax row has exposed some of the transactions.

Last month, the Government repossessed the Kingfisher (Kajubirizi) discovery area, an oil field in Hoima, from Tullow Oil after the company failed to meet some of the set terms.

The blocks, 3A and 1, were jointly operated by Heritage and Tullow. However, when Heritage sold its interest to Tullow, the Government declined to recognise the transaction over non-payment of taxes.

In a letter, energy and mineral development minister Hillary Onek also said Tullow’s licence had expired.

“The period within which you are supposed to have applied for a petroleum production licence for the Kingfisher field expired in February 2010,” he told the Tullow managers.

The repossession meant that the Government can license another company. This puts Tullow at a risk of losing $1.45b, which it paid Heritage for the asset.

Meanwhile, speaking at the opening of the same delegates’ conference, the outgoing NRM secretary general, Amama Mbabazi, revealed that the party had elected 2.5 million people from the grassroots since it began the process in July.

Mbabazi promised that the party would provide mobile phones to its leaders to ease internal communication.

He regretted the malpractices in the primaries, but said the party had embarked on cadre identification, training and placement to ensure that only people with good political orientation form its future leadership.

Ends

Tullow loses billion of dollars and its exploration right in Uganda oil field

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Economic AND Business News By Leo Odera Omolo In Kisumu City.

The Irish multinational oil firm, Tullow Oil is likely to lose billions of dollars under its existing exploration deal, which appear to be heading to the rock.

The simmering battle between Uganda and the oil exploration companies boiled up over last week with Irish firm, Tullow Oil losing its rights in the 400 million-barrels Kingfisher oil well, located I Western Uganda.

This development is well captured in a shocking in article published this week by the influential weekly, the EASTAFRICAN. The report revealed in detailed account the fallout between the government and two Oil companies, Tullow and Heritage oil.

The development comes just weeks after Tullow oil paid its business partner in the blocks, Heritage Oil, nearly USD 1.5 billion for its stake – in a move that the industry players- had already described as “reckless”.

Citing section 20 {1} and {2} of the Petroleum Exploration and Production Ac/Cap 150,the Uganda’s Minister for Energy Hillary Onek last week made point blank clear to Tullow and Heritage that the period within which they should have applied for a Petroleum Production license for the Kingfisher field expired in February 2010.

“In accordance with the powers entrusted in the Minister under Section 19 {1b} of the Act, I hereby direct that the Kingfisher {Kajiburuzi} Discovery Area has ceased to form part of the Petroleum Exploration Area 3A {EA-3A} under the Petroleum Exploration License grated to you on September 8,2004.”

The Minister’s letter went on, “You are therefore either jointly or severally to cease carrying out any activities under the Discovery Area,” the Minister says in an August 17 letter to the two companies.

While Heritage may be home and dry as its shareholders share out part of the proceeds from its USD 1.45 billion exit from Uganda, its east while partner Tullow, which has spent some USD 3.1 billion in acquisition and operations in Uganda, has been left severely exposed, adds the report.

Against the conventional wisdom, Tullow rushed to pay its partner the full exit costs, even before the deal had secured full approval from the Ugandan government over a pending tax dispute, the report says.

Uganda had refused to clear the deal until Heritage paid USD 408 million in capital gains tax. As the deadline for expiry of Tullow’s pre-emption rights loomed in early July, the government relented, giving conditional approval to the deal after Heritage offered to pay 30 per cent of the dispute sum- USD 121 million-to the Uganda Revenue Authority, with the rest to be deposited in an escrow account pending the outcome of the arbitration proceedings in London.

However, the report says, Tullow proceeded to pay the remaining USD 287 million into an account with Standard Chartered in London, effectively putting the money out of reach of Uganda regardless of the outcome of the arbitration.

This development angered Ugandan officials, setting of counterattack that culminated in their invoking the law against Tullow.

Minister Onek last week told the EASTAFRICAN that the oil production Sharing Agreements signed with exploration firms were clear that tax disputes would be exclusively referred to Ugandan law.

“There is a whole page about tax in the Production Sharing Agreement, which puts tax disputes under Ugandan law and only other issues are subject to arbitration in London. There are also provisions for a tax tribunal under Ugandan law to which Heritage could take their dispute. Remaining 70 per cent of the dispute sum should have been deposited in a Ugandan bank, not Standard Chartered London.

“We therefore consider the agreement under which Conditional Approval was granted invalid until all the conditions for conditional consent are fulfilled,” Mr Onek said, adding that Uganda would not continue dealing with a “dishonest company”. There are so many other companies willing to come in.” he said.

Tullow is now carrying the cross all by itself having paid Heritage the full price of its exit from Uganda. While Heritage had earlier agreed to exchange USD 150 million of its dues for interests in any other field held by Tullow, sensing what was coming; they upped the game and got USD 100 million in cash instead.

This is part of the money they used to deposit the USD 121 million with the URA effectively leaving them in a position to deliver the USD 1.33 billion they had promised their shareholders.

The report says that Tulow was desperate to close the deal because it had not been completely honest with its shareholders. For months, it had been making positive statements about the Ugandan business, which pumped up its share price on the London Stock Exchange.

Such misrepresentation, says the report, include data on oil finds by Heritage, which at the time did not belong to Tullow. A collapse of the transfer deal would expose this, threatening the USD 3.1 billion that has so far been spent by the company in Uganda.

Tullow’s USD 3.1 billion exposure in Uganda is made up as follows. The USD 1.1 billion Hardman buyout, USD 500 million exploration of block 2 and the USD 1.45 billion Heritage buyout. Block 3A expires in September 7, while Block 1 expires next year.

Questions are also emerging on how Tullow racked up such huge costs for its operations in Uganda.

While Heritage spent USD 150 million to explore 6,279 square kilometers, Tullow claims to have spent USD 500 million on much smaller area. Unless there are demonstrable geological differences to justify the costs, belong to Tullow’s costs, which are deductable fro sales.

Ends

leooderaomolo@yahoo.com

Uganda has proposed to lease oil wells to prospectus investors

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Economic and Business News By Leo Odera Omolo

UGANDA has repossessed an oil field in Hoima after exploration company Tullow Oil failed to meet the Government’s terms.

Accordingly, the Kingfisher (Kajubirizi) discovery area has ceased to form part of the petroleum exploration area Tullow had been licensed to manage in 2004, energy and mineral development minister Hillary Onek said yesterday.
The area was technically referred to as 3A(EA-3A).

Block 3A and Block 1 were jointly operated by Heritage and Tullow. However, Heritage sold its interest to Tullow.

In a letter, Onek said Tullow’s licence had expired.

Under the law, Tullow should have applied for a production licence within two years of discovering the oil, which it did not. “The period within which you are supposed to have applied for a petroleum production licence for the Kingfisher (Kajubirizi) field expired in February 2010,” he told Tullow managers.

The development means that Uganda can license another player since it does not recognise Tullow’s transaction with Heritage. Accordingly, Tullow risks losing $1.45b, which it paid Heritage for the asset.

Athough Heritage and Tullow discovered the oil in 2008, none of them applied for a production licence.

“There was either lack of interest in the block or the operators were not willing to provide Government with plans for oil production,” said an expert in the oil industry.

Tullow alluded to a delay towards production in the affected field.

“The Government has indicated that they will not grant an appraisal licence extension until the tax matter is resolved,” the firm said in its bi-annual report to shareholders on Wednesday.

The Government had required Heritage to pay tax on the income they got from the sale of the field, which they did not do. Now the Governent wants the tax paid by Tullow who took the asset.

“In the short term, it is, therefore, anticipated that there may be some slow down in activity.

“While effective ownership of the assets has been transferred to Tullow, the Government wishes to resolve the tax dispute prior to granting final approval to proceed,” Tullow added.

In an apparent contradiction, the firm also said: “The Government of Uganda has, however, indicated that a dispute with Heritage over capital gains tax needs to be resolved before the purchase from Heritage…”

The Government insists Heritage must pay all the taxes due to the transaction amounting to $404,925,000.

Heritage is not willing to pay and has referred the matter to the London Court of Arbitration.

The fate of Tullow’s $1.45b it paid to Heritage is not clear.

Ends

Uganda: NEWVISION calls for the suspension of all oil deal until taxation law is enacted

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Reports Leo Odera Omolo

THE Government has tabled a Bill requiring that oil companies provide the Uganda Revenue Authority, details of their annual returns. When the Income Tax Amendment Bill 2010 becomes law, the non-compliant companies face a penalty of between $50,000(sh110m) and $500,000(sh1.1b).

While the Government should be commended for trying to put in place measures to guard against this valuable natural resource, the tabling of this Bill now is a confirmation that the existing agreements with the oil companies were flawed. The bitter truth is that at the moment, we are relying on the goodwill of these oil companies as far as any revenue is concerned.

Uganda is, therefore, in a very precarious position and is likely to lose the $404m(sh808b) tax claim against Heritage because there was no legal framework governing such a payment.

We are even not sure whether what we are claiming is accurate because the existing agreements lack methodology of estimating what Uganda should be getting. This was how Hardman Petroleum went away without paying almost anything.

However, it is better late than never. This is not the time for the blame game, but for finding lasting solutions to avoid the oil curse. Uganda was desperate for foreign investors who could have taken advantage of our inexperience in the oil sector to put in place a skewed agreement.

Uganda should, therefore, suspend all transactions on oil exploitation and go back to the drawing board to ensure the country gets a more favourable deal.

For instance, it is ridiculous for Ugandan crude oil price to be fixed at $15(sh30,000) per barrel when the international market price is $80(sh16,000) per barrel. The oil exploitation phase is rather delayed until a solid legal framework is in place than rush and lose everything.

Ends

Uganda: Olara Otunu predicts that oil revenue in nation will be eaten up in their basket of corruption

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Writes Leo Odera Omolo

In an exclusive interview with the Reuters News Agency in New York the leader of Uganda’s UPC opposition party, Dr Olara Otunnu whois hoping to topple President Museveni in the next year’s presidential election has predicted that the massive oil revenue which his country is expecting to generate once the production began would melt in the pots and pockets of the corrupt individuals.

His comments over this subject has sparked off sharp reactions from supporters of the NRM government at home and abroad.

Corruption will swallow billions of dollars in revenue from the country’s budding oil industry that is needed to build schools, hospitals and roads, says a Ugandan opposition leader.

Olara Otunnu, a former UN under secretary-general who heads the Uganda People’s Congress party, said there had been no transparency on plans to develop the oil found in 2006 along Uganda’s border with the Democratic Republic of Congo.

Otunnu, Uganda’s foreign minister from 1985-86, hopes to topple longtime President Yoweri Museveni when the country goes to the polls in February next year ahead of the start of commercial oil production at the end of the year.

British firms Tullow Oil and Heritage Oil have found up to 2 billion barrels of oil in the Albertine Rift Basin and experts say the reserves could be four times bigger. Uganda stands to earn about $2b a year in oil revenue.

“Based on the current record all that money would be swindled,” Otunnu told Reuters in an interview in New York.

“All this is being handled personally and exclusively at the kitchen table of the president. We know nothing about it.”

“We don’t need to wait until oil begins to flow. We already know, the oil revenue will become part of his personal ATM machine,” said Otunnu, who could be arrested when he returns to Uganda for failing to appear in court this week on sedition charges related to radio show comments made earlier this year.

He says the charges are a bid by Museveni to silence him.

Ugandan Minister for Information Kabakumba Matsiko said it was widely accepted that East Africa’s third largest economy has been blighted by corruption, but the Government has systems and institutions in place to combat it.

“Otunnu is entitled to his opinion. Unfortunately he’s blinded by his own hatred,” Matsiko said.

“This oil has always been there, but no previous government including the one in which Otunnu served ever thought about starting exploration.”

“The president has stated on several occasions that the oil money will not be used for recurrent expenditure but long-term infrastructure development in the health, transport and other sectors,” Matsiko said.

Museveni won power in 1986 and was credited with returning stability and economic vitality to Uganda, ravaged by dictatorship and civil wars in the 1970s and early 1980s. The country’s economy is seen growing between 7-8% in 2010/11 from 5.6% in 2009/10.

But donors and global civil society groups accuse Museveni of suppressing opposition and free speech, tightening his grip on power and failing to rein in rampant corruption.

International donors said this week that they would trim at least 10% off their $360m contribution to Uganda’s budget in the year to June 2011 because of concerns over corruption.

Opposition parties have refused to work with the electoral commission, because they say it is corrupt, but Otunnu said that does not mean there will be a boycott of the election.

He also said negotiations continue among leading opposition parties to form an Inter-Party Cooperation coalition to field a single candidate against Museveni.

“Everything is turned into this corrupt enterprise,” said Otunnu.

“We must make sure that there is change, there’s accountability, there’s transparency that this oil will be a blessing for the people of Uganda,” he said.

Uganda: Heritage Oil battles with Ugandan revenue authority is a waste of time

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Economic and Business News By Leo Odera Omolo in Kisumu

Heritage has demanded to settle the tax dispute at the
international court of arbitration

AFTER two decades of search for oil and gas, huge commercial reserves have been confirmed. However, Uganda’s ability to transform the assets into cash is in balance.

East Africa’s third largest economy has been entangled in a $404.9m tax dispute arising from a proposed $1.35b transaction, posing a serious challenge to Uganda’s capacity to raise oil revenues.

Heritage Oil and Hardman Resources, which later sold its stakes to Tullow Oil in 2004, ran a successful exploration campaign that enhanced the value of their licenses at least 10-fold.

Now the petroleum exploration is moving into the development and production phases that requires huge risk capital, access to project finance and long-term investments

Heritage sells stake
Heritage with little resources decided to cash out from the oil stakes it held in Uganda. After spending just $135m, the firm in December last year decided to sell the holdings to Italian giant Eni for $1.35b.The said offer was later pre-emptied by Tullow. The two firms are equal partners in the blocks.

However, the approval of the transaction was delayed due to disagreements over a $404.9 capital gain tax. Uganda rightfully claims 30% of the $1.35b deal.

Heritage was against paying the tax “based on comprehensive advice from leading tax experts in Uganda, the United Kingdom and North America.”
It demanded to settle the tax dispute via the international court of arbitration in London on depositing $108m.

Heritage is entitled to claim this money if the London Court rules that the firm is not required to pay taxes.

Heritage deposits $121m on URA account

In a dramatic twist of events, Heritage sold its assets to Tullow on depositing $121,477,500 of the disputed tax of $404,925,000 on a Uganda Revenue Authority account. The balance of $283,447,500 has been deposited in an escrow account held on Standard Chartered Bank pending resolution of the tax stalemate.

This is totally in contradiction with the energy minster, Hilary Onek’s, resolve to ensure that the land-locked country got the taxes it deserves.

Early this week, Onek told the media that Heritage will have to pay the full amount of tax ($404,925,000).

“They (Heritage) have been doing all sorts of things to avoid paying the tax but they will have to pay the full amount and the earlier they pay the better,” he said.

“Look, these guys are making super-normal profits. They just invested a tiny little figure of $150m and now they are going to earn $1.5b, why don’t they want to pay tax on that money?” Onek wondered.

President cautioned

There were also reports that Uganda Revenue Authority (URA) had advised the President not to accept the arbitration in London because Uganda will not be able to collect any tax.

President Yoweri Museveni has been assuring parliamentarians and the public that the tax arising from the $1.5b oil deal must be paid fully.

Legal analysts

Legal experts and analysts predict the rush to accept the deal will deny the nation the earliest opportunity to earn oil revenues; even before the first barrel is pumped out of the earth crust.

“Ugandans should not expect money if the tax dispute is resolved in the arbitration court because our laws will not be relevant,” Dickens Kamugisha, the African Institute of Energy Governance (AFIEGO) boss, observed.

“Uganda is a sovereign state and, therefore, all oil companies and any transactions should be subjected to national laws. By going to London, it means that Uganda accepts it is not supposed to levy any tax.”

The income tax laws clearly explain that any transaction in Uganda is subjected to 30% of the capital tax gain.

“The minister says that taxes should be paid and later you hear that the transaction has taken place. This is a bad precedent, which will encourage oil companies to go away without paying taxes,” said a petroleum expert.

Experts have revealed that Uganda could also lose revenues in form of tax in the proposed farm-down process where Tullow intends to partition two-thirds of its interest to Chinese National Oil Off-Shore Company (CNOOC) and Total.

“I don’t think Tullow will accept to pay any tax if Heritage does not pay. Tullow will try avoiding the tax since Heritage will have created a dangerous precedent,” Kamugisha explains.

“Government officials should serve Ugandan interests by forcing the companies to pay all the taxes in Uganda, not in London,” he said.

Tullow Uganda is selling part of its interest–two-thirds each – to CNOOC and Total – to get the much needed risk capital for the development phase Uganda’s oil industry.

Kamugisha advised that any further oil transaction should be stopped until “sufficient and strong laws are put in place to prevent oil companies from fleecing us.”

“Under what laws are the transactions taking place? Already the energy ministry admitted that the current petroleum laws are weak and, therefore, this means that policy-makers don’t have the capacity to negotiate better deals on behalf of Uganda,” he observed.

This will not be the first time tax in the oil sector has been avoided.
No taxes were levied when Tullow bought Australian firm Hardman Resources assets at about 860 million pounds.

Uganda wants to license several oil firms to avoid monopoly.
The firms must also support the Government’s development strategies, including early commercialisation of the oil resources, value addition and training of Ugandans in oil-related activities and processing.

Highlights

• Tullow has paid the agreed cash consideration of $1.35b;

• A further $100m was paid by Tullow in full and final settlement of a potential contractual dispute between the parties relating to the contingent deferred amount

• Heritage has received cash of US$1,045,075,000

• Heritage has disputed a tax assessment of $404,925,000 and deposited $121,477,500 with the URA, representing 30% of the disputed amount;

• The balance of $283,447,500 remains on an escrow account and will be released following resolution between the Government and Heritage of a mechanism to resolve the tax dispute

• Heritage intends to pay a special dividend of up to 100 pence per share in August 2010.

Ends

Uganda: HERITAGE oil has earned USD 1.5 billion for the sale of its oil well in Uganda

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Economic and Business News By Leo Odera Omolo

HERITAGE Oil has completed the sale of its oil and gas interest in Uganda after it accepted terms and conditions set by the Government.

The deal will go down the history as the first biggest transaction ever held in sub-Saharan Africa.

The firm sold its entire stake in Blocks 1 and 3A to its partner Tullow Uganda, who paid $1.45b in cash.

“As an exploration company, we felt it more appropriate to exit now and leave the development of the Ugandan oil industry to other companies with the relevant downstream expertise,” Tony Buckingham, Heritage’s boss, yesterday said in a statement.

“We are delighted to have played the key role in developing this new major industry for Uganda. The success of our exploration programmes has generated significant value for the people of Uganda and our shareholders.”

However, Heritage had to deposit $121,477,500 with the Uganda Revenue Authority account of the disputed tax assessment of $404,925,000.

The balance of $283,447,500 has been deposited on an escrow account held in Standard Chartered Bank, pending a resolution between the Government and Heritage of a mechanism to resolve the dispute.

“We will continue to co-operate with the Uganda government and look forward to resolving the tax matter as soon as possible,” the Heritage boss stated.

The transaction follows the Government’s conditional approval endorsed in July 6, allowing Heritage to sell the assets.

The conditions were that the firm would pay $121,477,500 and demonstrate that it is willing to pay the remaining $283,447,500.

In turn, Heritage had to either provide a bank guarantee for the balance or letter of credit from an international bank to the Government to provide security for the remainder of the disputed amount.

Aidan Heavey, the Tullow Oil boss, said: “This was a major step forward for Uganda’s oil industry.

“We now look forward to signing the farm down agreements with CNOOC (Chinese National Oil Offshore Corporation) and Total in the coming weeks and commence work with them on an accelerated basin-wide development plan that is expected to deliver production well in excess of 200,000 bopd from the Albert Rift Basin.”

The biggest single transaction in sub-Sahara Africa was delayed due to a $404,925,000 tax dispute between the Government and Heritage.

Heritage’s position, “based on comprehensive advice from leading tax experts in Uganda, the UK and North America,” was that the $1.5b transaction was not taxable in Uganda.

The firm proposed an option of arbitration in London in the UK over the tax dispute.

But Kabagambe-Kaliisa, the energy ministry permanent secretary, insisted that the firm had to pay taxes “as assessed by the commissioner, Uganda Revenue Authority.”

The announcement brings to an end a furious bidding row between Tullow and Italian giant Eni over Heritage’s oil stakes on the shores of Lake Albert.

Heritage Oil and Hardman Resources, which later sold its stakes to Tullow Oil in 2004, ran a successful exploration campaign that enhanced the value of their licenses at least 10-fold.

Now the petroleum exploration is moving into the development and production phases that requires huge risk capital, access to project finance and long-term investments

Heritage, with little resources, opted to cash out from its bounty. After spending just $135m in Uganda, the firm decided to sell the holdings to Italian giant Eni for $1.35b. But the offer was pre-empted by Tullow. The two firms are equal partners in the blocks.

Two decades of uphill struggle in search for oil and gas has confirmed huge commercial reserves –about two billion barrels in place. This has sparked off investor interest in Uganda.

ENDS

Uganda: Heritage must pay all the taxes from the sale of its oil rights before the government endorses sale

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Writes Leo Odera Omolo

Petroleum explorer Heritage Oil must pay the full amount of tax on earnings from the sale of assets in Uganda before the Government fully endorses the deal, Hillary Onek, the energy minister, has said.

Recently, the Government gave Heritage conditional approval to sell its exploration assets to Tullow Oil after months of delay caused by a dispute over tax on earnings from the sale.

Under the conditional approval, Heritage was to deposit 30% of the disputed $404m capital gains tax with the Uganda Revenue Authority and give the bank guarantee for the remaining 70%, which would be redeemable on completion of an arbitration process.

“Heritage is evasive. They have been doing all sorts of things to avoid paying the tax, but they will have to pay the full amount and the earlier they pay, the better, Onek said on Sunday.

Uganda discovered oil in 2006 in the Albertine Rift basin along the border with the Democratic Republic of Congo and reserves are estimated at about two billion barrels.

Commercial production is expected to start in the last quarter of 2011.

On July 7, Heritage issued a statement saying it had received advice that the disposal of the assets was not taxable.

“These guys are making super-normal profits. They just invested a tiny little figure of $150m and now they are going to earn $1.5b. Why don’t they want to pay taxes on that money?” Onek asked.

He declined to comment on whether the Government had scrapped the conditional approval given to Heritage on July 6 and whether Uganda would go for arbitration in London to resolve the tax dispute.

Once Tullow has acquired Heritage’s stakes in blocks 1 and 3A for up to $1.5b, it plans to bring in China’s CNOOC and France’s Total to develop the fields and turn Uganda into one of the top 50 oil producers.

Ends

USA: Gulf coast oil spill impact made much worse by Detergents!

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This report is about interview of an independent documentaries maker (James Fox), and an attorney. They were inspired to visit and personally investigate what is the situation at the scene of very massive BP oil spill off the Gulf Coast beaches of Alabama.

The interview was conducted by Whitley Streiber – – a writer who operates the web site, unknowncountry.com . This site contains the section, Dreamland, which contains Listen Now item for 5 interviews which may be listened to using Windows Media Player.

Their findings are that this is turning out to be one of the Biggest disasters in recent decades. At 3 million barrels per day continuing spillage estimated rate, this is about 10 fold higher than the figures widely published in the regular news media.

The situation going on is that of “the foxes have been put in charge of guarding the hen-house”. BP itself has been designated as the entity to take charge of the cleanup.

The film maker has been, every 48 hours, posting his video coverage from the scene of these events, to the Youtube.com site. On YouTube, search for ‘Day 50, flight over Grand Isle’, as one example, James Fox said.

The primary treatment being used on this spill is application of detergents (also called dispursants). Scientists who in past have evaluated the effectiveness of this kind of treatment are in agreement that it makes such a situation 10 to 100 times More Damaging than even NO Treatment. Even the EPA took this knowledge into account and has issued instructions that this method not be used here. Apparently, spraying of detergents by airplanes under cover of night is done in order to make the activity less obvious non-alert observers.

The problems with using detergents on such an oil spill were described. If untreated, the spilled petroleum would float on sea surface (where inflated floating barriers plus surface skimmer equipment could be effective). However, in reaction with detergents, the petroleum clumps up into tar balls, which are usually slightly heavier than water. Depending on temperature variations, they can again rise in water, or settle in sea water. These products can then be shoved around by the sub-surface sea currents, un-seen by observers watching the surface.

This petroleum spill constitutes a major toxicity threat. Firstly, petroleum products are unhealthy if breathed in by air or swallowed in water being drunk. Secondly, the mixture contains especially threatening levels of heavy metals. There may be a risk that in case of major storms, some of the material, in particulates form, could perhaps become airborne, and thus further spread possibilities of acute poisoning, and also triggering of cancers.

In their own observations, and by questioning of the locals, these 2 witnesses were utterly amazed. Apparently, activity by teams on the ground (on land and in marine vehicles), is almost totally non-existent! The only exception is that of very small (ineffective / overwhelmed) efforts on the part of local volunteers, encouraged by a few local officials. This is in stark contrast to the assessment of the size of the event – – compared to a tidal wave, although the defenders have just a few brooms.

The local fishermen have reason to be upset, these witnesses find. The fisherman are not able to harvest their normal catch, so they are left to sit idle. Their offers to provide services to help with clean up ops, given their skills and intimate knowledge of local marine conditions, even as volunteers, is consistently declined by BP. Offers of aid and expertise sent from foreign nations is likewise declined.

These witnesses conclude by calling for government agencies to start to enforce their own already existing mandates. Furthermore, the continuing applications of detergents to the spill (which federal officials already say should not be used at all), ought to be immediately stopped.

This write up is based upon hearing, Sun. 20 June 2010, an interview dated 16 June.

Spread the word. Resolutions that help in clean up, not just encourage even greater damage, are an immediate need.

– – pwbmspac – –

Uganda: Oil extraction hit a snag over disagreement between government and exploration firm

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Business and Economic Report By Leo Odera OMOLO

A PLAN to start extracting and refining Uganda’s oil has hit a snag due to tax disagreements between an exploration company and the Government.

Heritage Oil and Gas Company Ltd has to sell its interests to a richer company that has the resources to extract and refine the oil, but does not want to pay taxes on the sale.

The Government, on the other hand, insists Heritage has to pay the capital gain tax amounting to over 800b.
Heritage is now seeking arbitration with the London-based United Nations Commission for International Trade Law (UNCITRAL), a process that usually takes years.

President Yoweri Museveni has often said local oil production would create jobs, address shortage of petroleum products and lower the prices. Uganda currently needs about 11,000 barrel of oil per day.

Production was expected to start next year with heavy fuel oil and gas, later to be followed by paraffin, diesel, petrol and aviation fuel. But now Ugandans will have to wait longer for the $1.5b project.

Heritage wants to sell its interest in oil blocks 1 and 3A to either Italian giant ENI spa or Tullow Oil and is supposed to earn $1.5b from the sale.

The transaction requires that a prospective buyer immediately pays $1.35b and a further $150m or surrender a stake in a producing oil field of a similar value within two years.

President Yoweri Museveni has often said local oil production would create jobs, address shortage of petroleum products and lower the prices.

Uganda currently needs about 11,000 barrels of oil per day.

Production was expected to start next year with heavy fuel oil and gas, later to be followed by paraffin, diesel, petrol and aviation fuel.

But now Ugandans will have to wait longer for the $1.5b project.

Heritage wants to sell its interest in oil blocks 1 and 3A to either Italian giant ENI spa or Tullow Oil and is supposed to earn $1.5b from the sale.

The transaction requires that a prospective buyer immediately pays $1.35b and a further $150m or surrender a stake in a producing oil field of a similar value within two years.

But after negotiations with the Government collapsed, Heritage on Thursday issued a statement saying the sale could not start immediately.

“Heritage’s position, based on comprehensive advice from leading tax experts in Uganda, the United Kingdom and North America, is that the disposal of the assets is not taxable in Uganda,” the company said.
Heritage argues that they are not under obligation to pay the tax.

But it “has also offered to deposit $108m with the Uganda Revenue Authority (URA) on receipt of the payment from its transaction, which would be refunded to Heritage if it is ultimately determined that no tax is payable.”

The United Kingdom-based oil company claimed that the offer of $108m was based on Uganda’s Income Tax Act, which requires a taxpayer to deposit 30% of the disputed amount of tax with the URA pending final resolution of the dispute.

Efforts to get a comment from energy minister Hilary Onek and his permanent secretary were futile.

However, the Financial Times yesterday quoted Onek as saying Uganda “would not budge” and that, like any company in Uganda, Heritage was liable for the tax.

He rejected arbitration in London.

“The oil fields are not in London. They (Heritage) are doing business here based on a national asset. They are obliged to pay the tax,” he said.
“If I were Heritage I would not go for arbitration. I would just pay my tax and get my super profit. I don’t understand that greed.”

Asked for a comment, Tullow Oil said they would buy Heritage’s interests as soon as the company sorted out its issues.

“It is clear that all parties support the transaction and that the Heritage tax issue is now the only matter outstanding,” said Jimmy Kiberu, the company’s spokesperson.

“We expect the Government of Uganda to give its approval of the transaction shortly after the Government and Heritage have agreed the mechanism for resolving that issue.”

ENI, on the other hand, said they are willing to pay the taxes plus the amount that Tullow was going to pay Heritage.
However, Tullow has the first right to purchase Heritage’s interests, provided they meet the Government’s conditions.

“ENI is ready to pay the amount due to Heritage and will respect the rights of Uganda’s Government by paying the taxes on top of the transactions,” said a company official.

ENI had entered into a sales agreement with heritage before Tullow preempted the deal.
Tullow said it had an agreement compelling Heritage to give them the first option in case it was selling its shares.

Prior to that, ENI spent close to $15m preparing an integrated oil and gas development plan for Uganda.

So far, two billion barrels of oil in reserve have been discovered in the Lake Albert basin, an amount that can meet Uganda’s petroleum needs for 25 to 30 years.

This is considered enough for commercial oil production and putting Uganda among the top 50 oil producing countries in the world.

Ends

leooderaomolo@yahoo.com