Kampala, Uganda | – French multinational energy company Total is seeking international arbitration over a tax disagreement with Uganda which could further delay crude oil production in the east African country.
“Total E&P Uganda confirms that it has filed a request for arbitration before the International Centre for Settlement of Investment Disputes,” Total’s Ugandan unit told Reuters on Tuesday. “The dispute relates to the imposition of stamp duty by the Uganda Revenue Authority, on the acquisition of Total’s interest in Exploration Area 2.”
Uganda struck commercial hydrocarbon deposits along its border with the Democratic Republic of Congo in 2006 and crude reserves are estimated by government geologists at 6.5 billion barrels. Commercial production, however, has been repeatedly delayed by previous disputes with other explorers over taxes and development plans.
The International Centre for Settlement of Investment Disputes (ICSID) is an arm of the World Bank that facilitates resolution of international disagreements among investors. In 2012, Total and China Offshore Oil Corporation (CNOOC) bought stakes from London-listed Tullow Oil in a $2.9 billion deal.
The deal allowed Total and CNOOC to take up a third each in three exploration blocks. Total has not disclosed how much tax is at the heart of the dispute or why it objects to the tax levy but a source at the Uganda Revenue Authority told Reuters it was worth about $30 million.
The source said that Total argues that Block 2’s Production Sharing Agreement (PSA) includes a tax waiver. The government also sparred with British explorer Heritage Oil which has since sold its exploration property in the country over tax. That settlement went in Uganda’s favour. Tullow Oil also has an ongoing case at the ICSID. Uganda says it expects commercial production to commence in 2018 at the earliest. It recently awarded a contract to develop and operate a refinery which will be a centrepiece for development of the industry.