Business
Tullow paid sh59b to government in 2013Publish Date: Mar 26, 2014
Tullow paid sh59b to government in 2013
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Tullow has a one-third interest in each of four licenses in the Lake Albert Rift Basin.
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By David Mugabe

TULLOW Oil paid a total of sh59 billion ($23 million) to government in 2013, figures released yesterday as part of upcoming new legislation pushing for industry transparency indicate.

The payment disclosures makes the London listed firm the first company to take this step ahead of the revised EU accounting directive which is expected to be in place in the UK later this year.

“We are also making voluntary disclosures of other taxes (e.g. VAT, Withholding Taxes, PAYE, NI and others) that we pay but are not covered by the revised EU Accounting Directive,” said George Cazenove, Tullow Group media relations manager.

In Uganda, Tullow has a one-third interest in each of four licenses in the Lake Albert Rift Basin shared with Total and Chinese firm, CNOOC. Uganda has about 1.7bn barrels of recoverable oil resources in the Lake Albert Rift Basin.

The $23m paid to Ugandan government was slightly higher than the $22 million paid in taxes to the Kenyan government.

Of the $23m, Tullow paid $4,138,000 in income tax, $11,000 in license fees and $4,870,000 was paid in Value Added Tax (VAT). Withholding tax received $1,861,000.

A Tullow spokesman in Uganda quoted another $12.1m as remittances in pay as you earn (PAYE) and $50,000 in training allowances was. Uganda’s figure however does not include payments to local businesses.

The sh59b is however much smaller to what is paid by beer and telecom firms, a factor that can be attributed to the slow-down in activity as both government and oil companies negotiated on the next stage to achieve first oil.

Local service providers welcomed the development but with caution. Denis Kamurasi, the vice chairman of the Association of Uganda Oil and Gas Service providers-a local lobby group supported the move saying it is line with efforts by the petroleum department which are yet to be published.

“It is good, but it would be good to know what particular entities were the beneficiaries because they could be firms from outside (but registered here),” said Kamurasi.

Tullow also expects a favourable judgment outside Uganda should the Ugandan Tax Appeals Tribunal not rule in its favour the appeal against the $473 million bill slapped by Uganda Revenue Authority (URA) in 2012 against the farm-down on Ugandan interests to Total and CNOOC.

“It is however probable, based on external legal advice that the International Arbitration will award in the Group’s favour” reads the reports in part.

In comparison to Kenya, Tullow spent $48 million with local suppliers in 2013 compared to $29m in 2012 and $24m in 2011.

“Our total payments to all Kenyan stakeholder groups, including taxes to the national government, expenditure with local suppliers and discretionary investment in community projects amounted to $71 million in 2013,” said Tullow.

“Uganda and Kenya are now at the heart of an emerging powerhouse in future global oil supply markets,” observed Aidan Heavy, Tullow chief executive officer.

Tullow employs just over 100 permanent staff in Kenya and over 70% of these are local nationals.

To date, Tullow has hit 600 million barrels of discovered recoverable resources in Kenya. But Kenya is yet to put in place necessary facilities to achieve commercial production. Some of these steps have already been attained by Uganda including passing necessary legislation.

Tullow notes in the report that progress is also being made with the Government of Uganda on approval for field development plans and a Memorandum of Understanding (MOU) was signed in February 2014.

Both Uganda and Kenya are exploring the possibility of joint initiatives for a crude oil pipeline to the Indian Ocean.

Ghana, which is at a more advanced stage of production received $217 million in 2013 in payments to local businesses, representing a 49% increase from the $145 million paid out in 2012.

A report said Tullow’s decision to undertake so-called project-by-project reporting undermines the position of the US oil industry lobby, which is seeking to block regulators from making such disclosures mandatory for oil and mining groups.

Tullow shares are listed on the London, Irish and Ghana Stock Exchanges but are yet to list on Uganda Securities Exchange- a process that began a couple of years ago but slackened.

An upcoming EU directive will oblige oil and mining companies to publish tax, royalty and other payments to foreign governments.

Advocates of project-by-project disclosures contend that anything less detailed would blunt the declared goal of the new transparency measures which is to help citizens of resource-rich states to counter the graft and misrule that often accompany natural wealth.

New EU rules, expected to come into force in the UK this year and across the bloc next year, stipulate project-by-project reporting.

However, in July, the American Petroleum Institute, which counts ExxonMobil and Chevron among its members, won a court ruling that forced the US Securities and Exchange Commission to reconsider its plan to enforce project-level disclosure under the transparency provisions in the Dodd-Frank financial reform act of 2010.

Dominic Eagleton, senior campaigner at Global Witness, a London-based anti-corruption group, said: "Instead of trying to weaken transparency rules designed to combat corruption and poverty in resource-dependent countries, the oil majors should follow Tullow's lead and embrace the fact that project-by-project reporting is the new global standard."

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