Government loses Shs256b in new Total-Tullow deal

Government has lost Shs256b in tax revenue in the latest deal where Irish Tullow agreed to sell its remaining 33.33 per cent stake in Uganda to French oil giant Total E&P, which transaction was announced by both companies yesterday morning.

Government will take only Shs54.6b ($14.6m) on the transaction down from Shs310b ($85m) which Tullow offered initially on the premise that part of the money ($700m) was going to be reinvested in the development phase but government rejected the offer and insisted on $167m (Shs609b) tax assessed by Uganda Revenue Authority.

Under the new deal, Total E&P will pay Tullow Shs2.1 trillion ($575m) for the stake, with Shs1.8 trillion ($500m) paid once the deal has been approved by government, and the balance of Shs780 billion ($75m) paid whenever Final Investment Decision (FID) has been reached.

In addition, Total E&P committed on “conditional” or bonus payments to Tullow when commercial oil production starts in the future, and only if a barrel of brent crude—the global benchmark for oil—will be trading upwards Shs232,285 ($65) per barrel.

Prices for crude oil have been tumbling over the past months against a backdrop of the global Covid-19 pandemic which grossly affected demand, and the Russia-Saudi Arabia price war.

By press time, brent crude had picked up to $20 per barrel, amid tensions in the Middle East stoked by US President Trump’s order to US navy ships to shoot down any Iranian vessels deemed a threat, up from less than $10 per barrel over the last days.