Ugandan oil reserves sold

Kampala - Canada's Heritage Oil said on Tuesday it has sold its share of Uganda's oil reserves to Anglo-Irish Tullow Oil.

The transaction was completed after the Canadian firm lowered its asking price in order to resolve a tax dispute with the government, according to Heritage statements.

"The disposal of the assets in Uganda has been completed and Tullow has paid cash of $1.45bn, of which Heritage has received and retained $1.045bn," said the statement.

Heritage earlier this month said it expected to gain $1.35bn from the sale, but the deal stalled because the two sides failed to resolve Kampala's demand of $405m in capital gains.

The difference in the transaction will be put towards resolving the tax demanded. Heritage said it had deposited 30% with the Uganda Revenue authority and the remaining in an escrow account until the tax dispute is finally resolved.

There was no capital gains tax when Heritage first entered the country, but Uganda amended its tax laws in 2008 and demanded Heritage be bound by them.

Ugandan taxes

Ugandan officials previously told AFP the tax issue was non-negotiable and the government was prepared to have the case arbitrated.

It was first believed the two sides would seek arbitration in a foreign court, but on Tuesday Uganda's deputy energy minister told AFP the issue could be resolved locally.

"I think there are enough laws in this country to deal with tax issues," Simon Dujanga said. "Things like production sharing agreements can be handled abroad, but on taxes, Ugandan courts are capable."

Neither side will be able to access the disputed $284m until the issue is resolved.

Tuesday's announcement nevertheless means that production can begin on Uganda's oil fields, which are estimated to hold two billion barrels.

Tullow, according to previous statements from Uganda and the company, will now bring in France's Total and China's state oil giant CNOOC to help construct a refinery capable of churning out roughly 150 000 barrels per day.

Each company will likely hold a 33% share of the endeavour in Uganda's northwest Lake Albert region.