Uganda's oil minister Hillary Onek told Platts Friday the government had decided to take over the oil field after both former stakeholder, London-listed Heritage Oil and Tullow failed to apply for a production license following the expiry of the earlier exploration license.
"Neither Heritage nor Tullow applied for the license--the exploration field is now in the hands of government," Onek said.
At 1120 GMT, Tullow's shares were down 4% at GBP12.09.
Tullow took over 100% ownership of block 3a after buying out its former partner Heritage last month, however, Heritage and the government are still at odds over the payment of capital gains tax from the deal.
Onek said the government had given Heritage enough time to pay the tax and there was no more time to waste.
He added that the government had made it clear to Tullow not to finalize the deal before the tax was paid in full.
"After consultations with government circles, our position is clear, we shall hold the field until the tax is paid," he said.
A spokesman for Tullow in London said the company was confident Uganda would respect its legal rights to the blocks.
"As disclosed at our results on Wednesday, the government of Uganda has been clear that the only issue remaining is with Heritage and their capital gains tax liability," the spokesman said.
"Once this issue is resolved, we can all move forward toward the farm-down [to France's Total and China's CNOOC] and the development plan.
TALKS CONTINUE
Negotiations are ongoing but Tullow is confident that the government of Uganda will respect Tullow's legal rights," he said.
Ugandan President Yoweri Museveni earlier this week said efforts were under way to recover money from Heritage and that the company should have met its obligations.
Ugandan tax officials are demanding $405 million from Heritage from the $1.5 billion sale of its 50% stakes in blocks 1 and 3a to Tullow.
But Heritage, which believes the transaction should not have been taxed, has only paid $121 million to the Uganda Revenue Authority out of the $1.045 billion it received from Tullow and put another $283 million in an escrow account, pending resolution of the dispute through arbitration in London.
Heritage, in an overview of its operations alongside its financial results for the first half of 2010 released Friday, said discussions with the Ugandan government were continuing "with a view to resolving the tax dispute," but gave no further details.
Tullow hopes to accelerate development of the blocks and turn Uganda into a "significant oil producing nation."
First oil from the blocks is expected in late 2011, and Tullow has said it anticipates reaching peak output of more than 200,000 b/d from 2014-2015.
Tullow also expects to carry out new exploration activity in Uganda and is drilling two appraisal wells, with results expected over the coming months.
China Chemical Weekly: http://news.chemnet.com/en/detail-1403616.html
