Tullow Oil wins $313 million Uganda tax case against Heritage
BY SELINA WILLIAMS
LONDON -- The High Court in London has ruled in favor of oil and gas explorer Tullow Oil in a legal action against Heritage Oil over the recovery of $313 million of tax payments made to the Ugandan government, the companies said Friday.
Heritage said it strongly disagrees with the judge' s decision and would look at its legal options, with a view to appealing the ruling.
The case relates to a deal in 2010, when Heritage sold its 50% stakes in two oil blocks in the Lake Albertine Rift basin in Uganda to Tullow for $1.45 billion. The Uganda Revenue Authority said that Heritage was liable for capital gains tax on the sale, a claim that Heritage contests.
Heritage declined to pay the tax and the government prevented completion of the sale, hampering Tullow' s plans to sell on part of the assets to French oil company Total and Cnooc.
In order to allow its deal with the other companies to proceed, which was a vital step in the development of the oil discoveries in the country, Tullow paid the Ugandan government $313 million in outstanding capital gains tax on the sale of Heritage' s assets.
Tullow and its partners in Uganda have discovered at least 3.5 billion barrels of crude reserves along the country' s western border with Congo. After months of back-and-forth negotiations, the companies have said they are close to an agreement with the government over construction of a refinery and export pipeline to tap the oil, which could require investments of more than $12 billion in the country.
In his judgment, Mr. Justice Burton found in favor of Tullow' s indemnity claim for $313 million in its entirety. He also dismissed Heritage' s counterclaim that it should be allowed to reclaim $283.5 million it had paid into an escrow account, pending the resolution of the dispute with the Ugandan authorities.
A further hearing will be scheduled to address matters arising from the judgment, such as the amount of interest Heritage owes to Tullow on the $313 million, and Tullow' s submissions in respect of payment of its costs by Heritage, Tullow said in a statement.
Dow Jones Newswires