Will President Museveni take President Magufuli’s advice?
Tanzanian President John Magufuli has told Ugandan President Yoweri Museveni not to focus on short-term gains.
The Tanzanian President was speaking in terms of taxing oil companies. He informed his compatriot that the vast tax placed on the oil companies was delaying the oil pipeline project.
This comes after plans to sign the final investment decision collapsed when Tullow Oil failed to sell 21.5% of its stake for U.S.$900 million to its partners – France’s Total E&P and China’s CNOOC last week.
President Magufuli made this known at the just concluded Tanzania-Uganda Business Forum in Dar es Salaam which he hosted.
“We are late. We are still sleepy,” said Magufuli.
He said Uganda should sacrifice some of the short-term gains for the national benefits.
“The Uganda Revenue Authority officials should not delay the project for the benefit of a large population”, he said.
Plans to sign the much-awaited Final Investment Decision (FID), which is needed to unlock nearly $10 billion for the development of Uganda’s Tilenga and Kingfisher oil projects, and the East African Crude Oil Pipeline came to an abrupt halt after Tullow Oil’s failed to sell 21.5 percent of its stake for $900 million to its partners – France’s Total E&P and China’s Cnooc – collapsed late last week.
At the heart of the dispute was the definition of the amount of money that Tullow Oil was to get from the transaction. Tullow Oil announced that out of the $900 million it would get from the sale of 21.5 percent of its stake, $700 million would be reinvested in the development stage of Uganda’s oil industry as part of its share of the contribution.
The government, on the other hand, looked at the $700 million as an earning and, therefore, imposed a capital gains tax on it. This difference in opinion would stall the negotiations for a while.
“We wanted the pipeline to be named Kaguta Pipeline when it opens,” Magufuli said, drawing laughter.
Uganda chose Tanzania port of Tanga over Kenya for its pipeline route in 2015. Since then, the government has been in negotiations with oil companies, asked partner countries to buy a stake in the project but also finalize agreements with Tanzania as a host government for the pipeline.
Following the collapse of the oil deal, Total E&P and Cnooc suspended all activities and tenders on the East Africa Crude Oil Pipeline until further notice. Magufuli told Museveni that if he needed to move forward, he has to “sacrifice short term gain and go for long term gold.”
“Let us do the pipeline and create jobs,” said Magufuli.
He added that in order to reach an FID, it is crucial that key project documentation, such as the Host Government Agreements and Shareholders Agreement for the EACOP project are finalized.