Tullow Oil Considered Bribing Museveni in Tax Dispute

Top officials from British oil firm, Tullow Oil, considered paying $50 million to meet the “short-term needs and demands” of Ugandan President Yoweri Museveni to help settle a tax dispute against a rival firm, UK High Court heard on Thursday.

The allegation was revealed during a legal battle to reclaim $313 million tax payment that Tullow Oil made on behalf of Jersey-based Heritage Oil after acquiring the firm’s Ugandan assets for a reported $1.45 billion in 2010. After the acquisition, Tullow paid $121.5 million on behalf of Heritage, which was a third the capital gains tax demanded by the Ugandan government.

In 2011, Tullow complied with Ugandan Revenue Authority’s demand for a further $313.5 million to settle the remaining tax liability and later sued both Heritage and the government to recover what it paid on behalf of Heritage.

The court heard how senior directors at Tullow Oil allegedly discussed making an ‘undocumented’ $50m payment to the Ugandan government before considering funding parts of the re-election campaign of President Museveni.

Angus McCoss, exploration director at Tullow Oil, suggested to fellow executives in a group email in August 2010 that the company pay for an oil licence to “meet the short term needs and demands” of President Museveni.  The top executives were also alleged to have suggested Museveni to tell the leaders of Mali, Kenya and Tanzania that “Heritage are gangsters.”

In its defense, Heritage Oil argued that the sale of its assets to Tullow Oil was not taxable because the sale itself took place outside Uganda (in Jersey, off the coast of Normandy in France) and that the company itself is not incorporated in Uganda.

The case has also embroiled the British Foreign Secretary William Hague who, according to documents released under the British’s Freedom of Information Act, personally lobbied on behalf of Tullow Oil in 2010 to get the Ugandan government to drop the tax demand.

In Uganda, Tullow discovered over one billion barrels of oil in the Lake Albert Rift Basin. The company also believes that Uganda could be the base for further oil exploration in its East Africa operations.

Tullow Oil has over the last few years grown to become an “exploration juggernaut,” discovering oil off the coast of Ghana, Ivory CoastFrench Guiana, and even in Kenya’s Turkana district, which borders Ethiopia and South Sudan.

In February this year, the company announced that it would dig for oil in Ethiopia in the hope that the Kenyan oil basin might have an extension into the Horn of Africa nation.

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