Tullow Oil paid the government of Uganda about $175m in taxes last year, the company announced last week, in what is the first solid revelation of how it spends its money in the country.
The Irish firm also spent $47.5m on local suppliers, and $44m in salaries to Ugandan staff. Tullow says that up to 88 per cent of the staff in Tullow Uganda are Ugandans.
“Tullow is making these disclosures in support of its commitment to transparency, which allows the citizens of the countries in which we operate to hold both Tullow and their own governments to account,” non-executive Chairman Simon Thompson said in the company’s 2012 report on Corporate Social Responsibility, titled Creating Shared Prosperity.
Thomson added: “Typically, over the life cycle of a project some 60% to 80% of net oil revenues after costs accrue to our host governments and it is important that the citizens of these countries can hold both Tullow and their governments to account for the money generated by our industry.”
However, the disclosure will also be viewed as a victory for different activists who have demanded such over the years, and for the designers of global trade rules that compel companies listed on international stock markets to publish what they pay in their different jurisdictions.
Godber Tumushabe, the executive director at the Advocates Coalition for Environment and Development (Acode), one of the civil society organizations advocating fortransparency in the petroleum industry, applauded Tullow’s decision to disclosure payments.
“It is a very interesting development. I commend Tullow for that decision and urge other companies to do the same,” Tumushabe told The Observer.
He urged government to fasten the process of joining the Extractive Industries Transparency Initiative (EITI), stressing that transparency in the petroleum sector is crucial if oil is to be a blessing to the country. The release of the figures comes at a time when Tullow is fighting to steer clear of allegations of bribery.
In 2011, Tullow was accused of offering bribes to three government ministers, with the matter turning into a heated debate in Parliament. The legislators then asked the ministers mentioned to step aside. More recently, during the hearing of the court case between Heritage and Tullow in London, a counsel representing Heritage said that Tullow had tried to offer an undocumented $50m to President Yoweri Museveni for his short-term needs. Tullow refuted these allegations, and later apologised to Museveni.
However, this report comes a few days after Energy minister Irene Muloni told a conference in Sweden that Uganda would soon be joining EITI, an international framework where governments publish their receipts from multi-national companies and companies publish their payments to government.
Part of the overall tax that Tullow paid to Uganda’s government last year is the $142m deposited in Uganda Revenue Authority as the oil firm contests the $473m capital gains tax assessment on the sale of two thirds of its assets to France’s Total and China’s CNOOC. Hearing of this particular tax case is expected later this year at the Uganda Tax Appeals tribunal.
About $31m was paid in Value Added Tax, Pay As You Earn, and Withholding tax. The report also lists about $2.6m as “other government payments.”
Tullow Oil spent an additional $2.6 million in land rentals and training allowances, plus an extra $4.8 million on social projects. The company also announced that it made a $600,000 discretionary investment to support the opening of an enterprise centre in Hoima, which provides capacity building initiatives for local SMEs.
There is a much bigger windfall for all Ugandans though, according to the report. Tullow and its partners are currently working with the Uganda government to decide on the best development plan for the discoveries.
“The potential in-situ value of Uganda’s oil reserves discovered to date amounts to about $100 billion. The government’s share of this is projected to be some 70% of net revenues. Based on current estimates of costs and the future price of oil that could amount to around $50bn over the life of the field,” the report points out.
Attention is expected to shift to Total and CNOOC to see whether they, too, can follow Tullow’s example. Companies have for long argued that revealing such detailed financial information, in such a competitive and secretive industry like oil and gas, would aid competitors.
The competition within Uganda’s oil industry is expected to intensify as new companies eye the country for new oil blocks. The government is expected to stage the next round of licensing as soon as the institutions are in place, with companies like Turkey’s Pet Oil eying more than one block.
Source: The Observer
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