Uganda Interior Minister to Resign As Graft Charges Rock Oil Sector

KAMPALA (Dow Jones Newswires), Oct. 14, 2011

Uganda's internal affairs minister said Friday that he would resign his position to pave the way for a smooth investigations into graft allegations in the oil sector during his tenure as the energy and minerals minister.

During a stormy parliamentary debate earlier this week, lawmakers called for the resignation of Hilary Onek, who was in charge of the energy and minerals ministry at the same as what ruling party lawmaker Gerald Karuhanga described as "dubious" payments were allegedly made to several Ugandan officials, including the current prime minister, Amama Mbabazi and former foreign affairs minister, Sam Kutesa.

"I will step aside as soon as parliamentary adhoc committee starts investigations," he told Dow Jones Newswires.

Onek was energy minister at the time London-listed Heritage Oil sold its 50% stake in two oil blocks to Tullow Oil for $1.45 billion. Uganda and Heritage remain embroiled in a dispute over the $404 million the Ugandan tax body assessed on the transaction.

Gerald Karuhanga, a ruling party lawmaker, presented a number of documents in parliament this week alleging that Tullow had bribed several Ugandan ministers with up to $25 million to sway some key decisions regarding its operations in the country in its favor. Tullow and the accused ministers dismissed the allegations.

"Tullow Oil totally rejects the outrageous and wholly defamatory accusations of corruption made against the company in the Ugandan Parliament," the company said in a statement this week.

Uganda's Daily Monitor newspaper quoted Karuhanga as saying Friday that he had received death threats from unknown people following his revelations.

Kutesa, who is already facing separate corruption charges related to the misappropriation of funds meant for the 2007 Heads of Government Summit, resigned his position Wednesday.

However, Mbabazi told reporters Wednesday that he won't resign because the allegations are "not true".

Graft allegations enraged the law makers Tuesday who later voted on a motion to slap a moratorium on the execution of any new oil deals, including Tullow's $2.9 billion sale of two thirds of its interests in the country to France's Total and China's CNOOC.

The development leaves the key deal in balance as Uganda awaits the commencement of up to $10 billion oil development projects in the oil rich Lake Albertine rift, where at least 20 oil fields have been discovered so far in three oil blocks.

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