Tullow Oil Refers Fresh Ugandan Tax Dispute for Arbitration

Tullow Oil Refers Fresh Ugandan Tax Dispute for Arbitration

KAMPALA, Uganda - U.K.-based Tullow Oil PLC has registered a fresh tax dispute in the U.S. against the Ugandan government over levies imposed on machinery it imports for oil exploration activities in the country, a company official said Monday.

The case has been filed with World Bank-affiliated International Centre for Settlement of Investment Disputes, said Jimmy Mugerwa, Tullow's general manager in Uganda. Tullow is challenging the Ugandan government's decision to levy an 18% value-added tax on of its imported machinery as well as other supplies into the country, he said.

A government official, who declined to be named, said: "The position of the government is that Tullow should not claim taxes on supplies as recoverable costs before oil production starts."

A hearing date for the case is yet to be fixed.

This is the latest spat between the exploration company and the east African nation and analysts say it could further hinder the already delayed startup of oil production in Uganda's Lake Albertine rift basin.

Uganda discovered oil in 2006 along its western border with Congo but a litany of disputes with oil companies continue to delay the development of oil fields which are believed to contain as much as 3.5 billion barrels of oil.

Uganda is facing a separate suit in London over its decision to levy a 30% tax on the $1.45 billion sale of Heritage Oil PLC assets in the country to Tullow in 2010. The tax spat compelled government to delay the approval of the deal for more than a year, delaying Tullow's own plans to sell part of the assets to France's Total SA and China's Cnooc Ltd.

Copyright (c) 2012 Dow Jones & Company, Inc.

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