The event was aimed to celebrate the continued growth and success that Vivo Energy has experienced since the Covid-19 pandemic, while highlighting new opportunities for suppliers to expand their businesses through the company’s ongoing transformation.

The conference focused on Vivo Energy Uganda’s initiatives, including network expansion, standardisation of shop look and feel, prioritisation of customer experience, and enhanced use of big data for informed decision-making.

These changes have translated into significant growth in value for Shell Select suppliers, further strengthening the company’s position as a leading player in Uganda’s energy and convenience retail market.

Alinafe Mkavea, Chief Commercial Officer at Vivo Energy emphasised the positive impact of network expansion on the business.

“The expansion of our network presents incredible opportunities for all of us. New sites mean increased business opportunities, greater incomes, and a more extensive market reach. We are committed to ensuring that every new site is a thriving hub for both our fuel and non-fuel retail businesses. The company’s focus on automation to improve stock management, streamline transactions, and enhance service delivery was also highlighted as a key strategy for ensuring operational efficiency and a superior customer experience,”Mkavea said.

She noted that in addition to network expansion, Vivo Energy Uganda is dedicated to upgrading existing stores and converting dealer-owned shops into fully branded Shell Select stores.

“This will ensure consistency in quality and experience across all locations. Furthermore, compliance and merchandising are areas of ongoing development. Vivo Energy plans to expand its Convenience Retail Coaches programme to maintain the highest standards of compliance and visual merchandising, ultimately boosting sales and improving customer satisfaction” she added.

Joanita Menya Mukasa, Managing Director at Vivo Energy Uganda applauded the  company’s suppliers.

“Your dedication and partnership have been instrumental in the continued success of Shell Select. Vivo Energy’s year-on-year growth has remained consistent compared to the previous year, a remarkable achievement that reflects the strong collaboration between Vivo Energy and its suppliers.”

“We take pride in our consistent performance and resilience.At Vivo Energy, our vision is clear – to be Africa’s leading and most respected energy business. But this vision extends beyond fuel. It encompasses the growth of our convenience retail business, making our Shell Select stores the go-to choice for convenience shopping.”

During the conference, Vivo Energy Uganda highlighted key strategic priorities for future growth which include expanding its network footprint, diversifying its retail offerings and standardising the retail experience across all Shell service stations.

According to officials, Vivo Energy Uganda is committed to driving innovation, expanding opportunities, and supporting suppliers in growing their revenues across the Shell Select/Shop network.

pipeline.

Uganda’s oil sector is expected to create up to 160,000 jobs, with a significant portion requiring specialised technical skills.

The orbital welding training program is part of EACOP’s broader initiative to enhance local expertise and ensure compliance with international pipeline welding standards and it was conducted by an industry expert Imran Dilmohamud, who introduced the trainees to orbital welding, a technique essential for pipeline construction.

“Unlike traditional welding methods, orbital welding uses an automated machine to create precise, high-quality welds, reducing material wastage and enhancing efficiency. This technology is widely used in the US, Europe, and China, but it is new to Uganda. The technique ensures consistency and quality, which is critical for a pipeline of this magnitude,” Dilmohamud explained.

Participants were also trained on the use of a flux core machine for capping the pipes, a process that involves depositing a protective layer of material to prevent corrosion.

Dilmohamud emphasized the importance of mastering this technique, as it would be the primary welding method used at the construction site.

For many of the trainees, the experience was both educational and eye-opening.

George William Barbatana, one of the participants hailed the training.

“It’s a simple process because it’s more automated, but it requires a strong foundation in welding. This is the first time we’re having such training in Uganda, and I see great potential for its application beyond pipeline welding, such as in tank and cylinder manufacturing,” Barbatana said.

The training session involved both theoretical and practical lessons, with participants initially struggling to grasp the intricacies of the orbital welding machine.

However, by the end of the session, they had developed confidence in operating the equipment.

EACOP’s Deputy Managing Director, John Bosco Habumugisha, commended the participants and emphasized the training’s significance for Ugandans.

“The world has advanced significantly, and as we accelerate oil extraction in Uganda, embracing new technologies and modern methods in the oil and gas sector is crucial. Welding is now a technology-driven process, not solely reliant on individual skill. Participants in this training are privileged to gain practical experience with automated welding systems, vital for the East African Crude Oil Pipeline’s construction. This program ensures efficiency and precision through advanced techniques like microscopic weld analysis.”

As Uganda advances its ambitious oil development, initiatives like the Orbital Welding Training Program are vital for empowering local talent, ensuring they are equipped to contribute significantly to the nation’s energy future.

The Uganda National Oil Company (UNOC) is set to take a 40 percent stake in the new refinery deal signed between the government and Alpha MBM Investments LLC, a UAE-based firm, Chimp Corps report.

Uganda on March 29 signed a historic oil refinery agreement with Alpha MBM Investments LLC, paving the way for the construction of a 60,000-barrel-per-day crude oil refinery in Kabaale, Hoima District.

The deal, witnessed by President Museveni, at State House, Entebbe marks a major milestone in Uganda’s journey toward energy independence and industrialization.

According to a statement from State House, the agreement “will see Alpha MBM Investments LLC take a 60% stake in the refinery, while the Uganda National Oil Company (UNOC) retains 40%.”

A Memorandum of Understanding (MoU) was signed on December 22, 2023, between the government and Alpha MBM Investments LLC from the United Arab Emirates, outlining cooperation and negotiation terms for the Refinery Project.

Negotiations on key commercial agreements with Alpha MBM Investments commenced on January 16, 2024, with their conclusion paving the way for the construction phase.

President Museveni hailed the deal as a game-changer for Uganda’s economy and warned government officials against frustrating investors with bureaucratic delays.

“I want to thank His Highness Sheikh Mohammed Bin Maktoum and our friends from the UAE for their commitment to investing in Uganda,” President Museveni said.

The refinery project will include; a state-of-the-art refinery complex in Kabaale, Hoima, designed to process 60,000 barrels of crude oil per day , a modern storage terminal in Namwabula, Mpigi District, ensuring adequate fuel reserves for national consumption.

The other components are; a 212 km multi-product pipeline, linking the refinery to the storage terminal, guaranteeing efficient transportation of refined products across Uganda and beyond and the Mbegu water abstraction facility, equipped with an advanced water pipeline system to support refinery operations and ensure sustainability.

The development works expected to commence this year, will see Uganda earn at least US$4b (about sh15.2trillion) in investment, on top of the ongoing oil related works, according to UNOC’s documents.

Besides the oil deal, Uganda and the UAE investors also signed five other agreements in various sectors, including the aviation sector, tree planting, a digital land management system, logistics cargo hubs and storage chain facilities, a comprehensive digital payment system for government transactions, streamlining tax collections and financial services and others.

President Museveni also reiterated his government’s commitment to fostering investment and ensuring Uganda benefits from its natural resources.

He cautioned against resistance to economic progress, declaring that those who delay investment will be left behind.

UAE investment

“If you don’t move, the NRM will move with or without you. We cannot afford to be left behind,” he warned.

President Museveni also praised UAE investors for their enterprising spirit, contrasting their success with Uganda’s underutilized potential.

“People in the desert, where there is no rain, have built an economic empire, while some Ugandans, blessed with fertile land and natural resources, remain poor. We must change this mindset,” he said.

Reflecting on Dubai’s transformation, President Museveni recalled how he first learned about its rapid development some years back.

“When we returned from fighting Amin, I had never heard of Dubai. It was only a few years ago that I visited and saw very active people. Work with them they are not bringing loans but investments,” he urged.

President Museveni further emphasized that Uganda must move from being a consumer economy to a producer economy, ensuring that its natural resources are processed locally to maximize economic benefits.

“This oil refinery is not just about fuel; it is about Uganda producing and exporting refined products instead of importing,” he said.

“We must stop exporting raw materials and instead add value to everything we produce,” he said.

The President reaffirmed his commitment to removing bottlenecks that hinder investment, assuring investors that Uganda is open for business.

“We are here to work with serious investors who bring capital, knowledge, and long-term benefits to Uganda,” President Museveni declared.

“Those who stand in the way of progress will be swept aside,” he added.

On her part, the Minister of Energy and Mineral Development, Hon. Ruth Nankabirwa emphasized that the project aligns with Uganda’s National Oil and Gas Policy (2008) and the East African Refineries Development Strategy.

She described it as an initiative that will not only enhance Uganda’s energy security but also catalyze economic transformation.

Jobs

“The refinery will create thousands of jobs, develop local expertise, and serve as a springboard for industries such as petrochemicals and fertilizer production,” Hon. Nankabirwa said.

“It will also attract Ugandan businesses to participate in the supply of goods and services, boosting local enterprise development,” she added.

Additionally, the minister noted that the project will fully comply with international environmental, health, and safety standards, integrating modern technologies to minimize environmental impact.

On the other hand, His Highness Sheikh Mohammed Bin Maktoum, who led the UAE investors’ delegation, expressed his deep commitment to Uganda, stating that he considers the country his second home and he is dedicated to supporting its development.

“I am honored to be here for these projects. As I always say, as long as I am in Uganda, I consider myself Ugandan. My team and I are here to support the nation and its people because our greatest happiness comes from seeing communities thrive,” Sheikh Maktoum said.

Reflecting on his first meeting with President Museveni nearly two years ago, Sheikh Maktoum praised Uganda’s leadership for its continued support and investment-friendly environment.

“I have never given up on this vision, I deeply appreciate Your Excellency’s support, and this is just the beginning of our journey together. What lies ahead is even greater and the possibilities are limitless,” he stated.

The event was also attended by the Minister of Finance, Planning & Economic Development. Hon. Matia Kasaija, the Deputy Attorney General, Hon. Jackson Kafuuzi , the Permanent Secretary and Secretary to the Treasury – Ministry of Finance, Mr. Ramathan Ggoobi , the Chief Executive Officer – UNOC, Ms. Proscovia Nabbanja, among others.

According to a statement issued by EACOP Ltd, the funding comes from a syndicate of financial institutions, including KCB Bank Uganda, the Islamic Corporation for the Development of the Private Sector (ICD), the African Export-Import Bank (Afreximbank), and the Standard Bank of South Africa, the parent company of Stanbic Bank Uganda.

However, the statement did not disclose the exact amount contributed by each lender. The Ugandan Ministry of Energy estimates that the pipeline’s construction will cost approximately $4 billion (about Shs 15 trillion).

EACOP’s shareholders include affiliates of the three upstream joint venture partners: the Uganda National Oil Company (UNOC), TotalEnergies E&P Uganda, and CNOOC Uganda, alongside the Tanzania Petroleum Development Corporation (TPDC).

The ownership structure is as follows: TotalEnergies holds the majority stake at 62%, while UNOC and TPDC each own 15%, and CNOOC holds an 8% share. The pipeline is being constructed alongside two major upstream oil development projects—Tilenga, operated by TotalEnergies, and Kingfisher, operated by CNOOC.

Uganda’s Minister of Energy and Mineral Development, Ruth Nankabirwa, previously stated that the project was initially planned to be financed through a 40:60 equity-to-debt ratio. However, she later announced a revised financing arrangement of 52:48. At the time, she noted that the government was seeking $1.2 billion for the EACOP project. According to the statement, the project overall progress is over 50 per cent.

The 1,443km (296km in Uganda and 1,147km in Tanzania) pipeline will transport Uganda’s crude oil from Kabaale-Hoima to Chongoleani peninsula in Tanga, Tanzania, for export to the international market. It will have the capacity to transport 246,000 barrels of crude oil per day

The Ugandans underwent a three weeks orbital wielding training at the Uganda Industrial Research Institute.

Orbital welding is a specialized, automated welding technique where a welding torch or electrode rotates mechanically around a stationary workpiece (like a pipe or tube) to create a continuous, high-quality weld.

Speaking during the pass-out at UIRI, EACOP Managing Director- John-Bosco Habumugisha said the training will give these wielders an upper hand in the fielding.

“Go and create jobs out there but also be part of a new trend and help Uganda’s oil and gas sector to grow. Let us be the change that the world needs. We want to see you use the skills acquired here. Go and make Uganda proud,” Habumugisha said.

The skills development officer at the Petroleum Authority of Uganda (PAU), James Okwi said this training has come in handy, especially for Uganda’s oil and gas sector.

“Such trainings will go a long way in ensuring Ugandans get capacity to meet the highest standards set by the oil and gas sector. The oil and gas standard requires that if for example you are going to do wielding, you needed to be internationally certified by an internationally accredited institution. This training is meant to ensure that.”

“As at March 2025, the total volume of 1.9 bn litres of fuel have been delivered to Uganda,” said Aron Bukenya, the trading specialist at UNOC during an engagement with Uganda’s Editor’s Guild in Kampala this week.

The cumulative 1.9 billion litres delivered over the year consists of: Premium Motor Spirit (Petrol) amounting to 991.97 million litres (12 vessels); Automotive Gasoil (Diesel) amounting to 805.33 million litres (8 vessels) and Jet A-1 Fuel amounting to 104.24 million litres (7 vessels, including 3 combination shipments).

Officials said this was a milestone in Uganda’s quest for fuel security, price stability, and direct sourcing from global markets.

The development follows UNOC’s designation as Uganda’s sole fuel importer in November 2023 under the Petroleum Supply (Amendment) Act, 2023, which allowed it to bypass Kenyan middlemen and deal directly with refiners and global traders.

MT Navig 8 Martinez and MT Sinbad delivered the first shipment of 58,000 Metric Tonnes of petrol (PMS) and 79,000 Metric Tonnes of diesel (AGO) in early July 2024.

Bukenya said since the first shipment in July 2024, “a total of 23 vessels have docked in Mombasa, carrying fuel destined for Uganda.”

Bukenya said, “before UNOC took over, you could not go anywhere in the world, on the high seas, and point to a little fuel that was dedicated to Uganda.  The fuel that we’re getting was being imported by and through companies in other countries, most importantly, Tanzania and Kenya, and they could decide to sell it to Uganda or sell it to companies in their countries or other countries.”

He added: “It’s only when UNOC took over that right now, I can go online and tell you and show you a vessel, and show you that vessel is carrying fuel dedicated to Uganda. If anyone touches it, they will be touching fuel that is marked for Uganda. So that’s one of the things that we wanted to achieve through security of supply and revenue generation.”

Refineries

UNOC’s fuel imports have been sourced from major global refiners, including Saudi Aramco, ADNOC (Abu Dhabi National Oil Company), and others with the view of ensuring a steady and diversified fuel supply.

Uganda imports about 2.5bn litres of fuel annually at a cost of about $2bn.

“Uganda used to import 95% of its fuel through Kenya through what is called the Open Tender System. Kenyan importers used to parcel this fuel and sell it to Ugandan companies. No Ugandan company would get enough through just a direct line from the traders,” said Bukenya.

He said trading giant Vitol has played a critical role in replacing intermediary traders and streamlining Uganda’s petroleum imports.

“UNOC is now dealing with one supplier – Vitol – on a long term contract. Why we chose Vitol is that it is the biggest oil and energy trader in the world. There’s no doubt about that. The numbers don’t lie. UNOC then plays the part of trader two, eliminating middle men, while maintaining steady supply to Ugandan oil marketing companies,” said Bukenya.

“So, as long as you are a Ugandan company with the ability to import fuel with the license by the Ministry of Energy to import fuel, you can buy your fuel directly from UNOC. You give your fuel requirement to UNOC. UNOC sources that fuel and then supplies it to you directly for logistical reasons. We are still supplying Ugandan oil marketing companies through Kenya using the Kenya pipeline company facilities, and we’re also making some supplies from the Jinja storage terminal.”

Pump Prices 

UNOC’s importation strategy intends to ensure fuel pricing in Uganda remains closely aligned with Platts market rates, which represent global product costs at the supply source.

Platts pricing accounts for 80-87% of UNOC’s product cost to Oil Marketing Companies (OMCs), helping stabilize pump prices.

Uganda National Bureau of Statics recently reported a gradual decrease in pump prices.

Petrol and diesel pump prices are slightly below Shs 5,000.

Bukenya said from July 2024 to February 2025, UNOC’s supply strategy has led to predictable pricing trends, with pump prices in Uganda reflecting fluctuations in Platts benchmarks.

He said the supply stability and competitive sourcing strategy have contributed to mitigating excessive price volatility in the local market.

While the exclusive bulk trading and direct procurement from refiners has seen Uganda achieve significantly reduced costs associated with intermediary traders, improved price competitiveness and ensured consistent fuel availability, there is a need to expedite the construction of the oil refinery.

The Petroleum Fund was part of the outcome of a benchmarking exercise in Norway at the time of developing laws and policies for the management of Uganda’s oil and gas resources.

Similar sovereign funds from oil and gas and other mineral resources have been operated by some me countries including Botswana and Libya to ensure that revenues and not spent on consumption which would earn less to the country’s development.

Dr Donald Kaberuka, a former president of the African Development Bank, has researched how oil and mineral revenues have impacted economies in Africa, and says those that created sovereign funds benefited more.

He, however, says such a fund must be well thought out regarding whether it should be aimed at saving for the future, an investment fund or a countercyclical fund – one to run to when the country runs into fiscal challenges.

Speaking at the 11th East African Petroleum Conference and Exhibition (EAPCE25)  in Dar-es-salaam, Kaberuka said, for example, that tying a fund for future use by law may lead to a country into debt and a slip into poverty because the money available in the fund is protected by law.

Uganda’s stand

Uganda’s Minister for Energy and Mineral Development, Ruth Nankabirwa, told the conference that Uganda’s oil revenues are protected by law for infrastructure and that in this way, future generations should benefit.

She reiterated that Uganda and East Africa, having come late into the oil and gas industry, have learnt from those who went there first to avoid the mistakes committed.

“For example, should a country pay for debt when it runs into a fiscal deficit or turn to the oil fund to fund the deficit?” Kaberuka posed.

But he also warned that most African countries that have oil and other huge mineral resources also have high levels of poverty because the oil industry creates “an enclave economy, yet the oil industry does not create many linkages.

He warned, for example, that minerals and oil and gas tend to get other sectors like agriculture, which otherwise benefits the majority of the households directly.

“Countries with such high deposits of natural resources then become net importers of food, and then what happens when the resource gets depleted?”

In a cautious advice against relying too much on oil and minerals, the economist said East African countries have been developing faster and more steadily than other regions, yet they had not started exploiting oil, unlike, say, West African counterparts.

Nankabirwa urged the countries in the region to consider joint investments in the development of the oil and gas sector, thanking Tanzania for agreeing on a critical partnership with Uganda through the East African Crude Oil Pipeline (EACOP) project.

According to her, this partnership also helped the project wither the financing storm caused by anti-fossil fuel crusaders.

She said the Ugandan refinery should also not be seen as only Uganda’s, adding that the Democratic Republic of Congo, Tanzania, South Sudan and others could take advantage of it.

“We need this critical partnership. Can we have a pool of resources that we can invest in any of the EAC partner states when we have a critical need to pull through such an infrastructure?”

The 11th EAPCE25 is running under the theme “Unlocking Investment in Future Energy: The Role of Petroleum Resources in the Energy Mix for Sustainable Development in East Africa,” bringing together key players from across the region.

“We can use the underground resources to pull away from the enclave economy to diversification, value addition that will take us into the knowledge economy, where we need innovation to use this financial resource for future generations,” the minister said.

She expressed hope that besides the revenues unlocked to advance energy transition, petroleum will provide gas to replace the use of biomass energy that has been responsible for the destruction of the environment and health effects to users of firewood for cooking.

As these industries expand, the demand for highly skilled welders continues to outpace supply, creating an urgent need for advanced training facilities and programs.

At an event showcasing virtual reality (VR) welding simulations, Ronald Ssezibwa, President of the Welders Society Uganda, emphasized the importance of adopting cutting edge training methods to reduce costs, enhance skill acquisition, and align Ugandan welders with international standards.

“Training a welder in oil and gas pipelines requires using real materials like pipeline sections, which are extremely expensive,” Ssezibwa said, noting that traditional welding training is prohibitively costly.

For instance, training a welder for 38 weeks in pipeline welding can cost up to $15,000, a barrier for many aspiring welders and institutions.

Virtual reality welding simulations offer a transformative solution, enabling trainees to practice techniques in a controlled environment before transitioning to real-world tasks.

This approach reduces material waste, lowers costs, and minimizes environmental impact caused by high energy consumption and harmful fumes.

“Virtual reality training allows welders to master the seven key parameters of welding with precision and confidence,” Ssezibwa explained. “It also reduces emissions and aligns with global environmental standards.”

Ssezibwa underscored the importance of sector-specific training to meet the unique demands of industries like shipbuilding, infrastructure, and oil and gas.

“A pipeline welder must meet the rigorous standards of the oil and gas industry, while a structural welder for high-rise buildings or bridges requires entirely different skills,” he said.

Despite Uganda’s potential, Ssezibwa admitted that the country has yet to fully embrace international standards, leaving local welders at a disadvantage. Many lack the advanced certifications required for high-demand jobs in oil and gas.

“Certification is critical, but it must be supported by job creation,” he stressed, urging collaboration between the government and private sector to certify welders and create opportunities for skill development.

Ssezibwa also criticized the reliance on foreign labor for major projects. “We train locals, but foreigners are often brought in to do the jobs. Ugandans must be adequately prepared and prioritized,” he said.

Denis Kamurasi, Director of Business Development at SCOG Elite Uganda Limited and Vice Chairperson of the Association of Uganda Oil and Gas Service Providers, echoed these concerns. Speaking at the launch of the VR welding tool, Kamurasi highlighted the lack of skilled welders as a missed opportunity for Ugandans.

“While we’ve made progress in training certified welders, many lack industrial exposure to gain practical experience,” he said.

The VR tool bridges this gap by replicating real-world welding conditions, ensuring trainees meet international certifications such as those set by the American Welding Society (AWS).

Kamurasi noted that this initiative aligns with Uganda’s goal to increase local participation in projects like the 1,440-kilometer East African Crude Oil Pipeline.

“No employer will risk hiring an uncertified welder for sensitive tasks like pipeline welding, where mistakes can jeopardize entire projects,” he explained.

The VR tool also serves as an assessment mechanism for employers to evaluate and address skill gaps, helping welders maintain proficiency even when not actively employed.

With over 500 certified welders in the country, Kamurasi highlighted the potential to position Uganda as a global supplier of skilled labor.

“There’s a global demand for welders over 300,000 annually in the Middle East alone. This initiative could reduce unemployment and boost household incomes,” he said.

Kamurasi praised partnerships with organizations like TotalEnergies, which is funding the training of 200 welders at the Uganda Petroleum Institute Kigumba. Such collaborations are part of a larger strategy to establish Uganda as a regional hub for artisanal and technical skills.

Prof. Charles Kwesiga, Executive Director of the Uganda Petroleum Institute Kigumba, stressed the life-or-death importance of skilled welding in the oil and gas sector. Referencing global disasters like the Exxon Valdez oil spill and the British Petroleum explosion, he warned of the risks associated with poor welding practices.

“If a pipeline weld contains an air gap and hot gases are applied, the trapped air can expand, leading to a rupture,” he explained. “Such failures can cause massive destruction of land, property, and lives.”

Prof. Kwesiga emphasized adopting modern training methods to ensure welders meet international safety and quality standards, protecting both people and the environment.

The Commercial Division of the High Court ruled that URA had erroneously computed the Capital Gains Tax (CGT) on the 2010 sale of Heritage Oil’s assets to Tullow Oil, a deal worth over $1.5 billion.

The court found that URA failed to account for exploration costs incurred by Heritage, amounting to $150 million, in its CGT calculation.

This omission, according to the judgment, led to an inflated tax liability and overpayment by Heritage Oil.

The court’s decision has been hailed as a significant victory for the company, which had contested URA’s tax assessment for years, arguing that the sale was unfairly taxed.

In an exclusive interview with NBS TV, Musinguzi expressed dissatisfaction with the ruling, asserting that URA adhered to proper procedures in calculating the CGT.

“We believe that the ruling was not based on a fair interpretation of the law and the facts at hand,” said Musinguzi.

“Our position is that the costs associated with the sale of assets, including exploration costs, were adequately considered when calculating the tax obligations.”

Describing the decision as “unfair,” Musinguzi reiterated URA’s commitment to ensuring tax compliance while defending its methodology.

He noted that the tax authority would challenge the ruling in a higher court to seek a fair outcome.

The $45 million refund, to be paid with interest, represents a significant financial and reputational challenge for URA.

If upheld, the ruling could set a precedent for other companies disputing tax calculations and refund claims.

This case highlights the complexities of Uganda’s tax regime, particularly regarding high-value transactions in the oil and gas sector.

Heritage’s consolidated appeal against URA partially succeeded on two grounds – one and three – out of the six it listed in its Notice of Appeal, according to the judgement dated and delivered electronically on December 23, 2024 by Lady Justice Susan Abinyo.

Ground 1 stated thus: that the Tax Appeals Tribunal (TAT) erred in law in its decision relating to TAT Application 26 of 2010 that section 79 (g) of the Income Tax Act applied.

Ground 3 on the other hand stated that the TAT erred in law when it disallowed the addition of the admitted and agreed exploration cost of $150m to the cost base in calculating the capital gain.

Section 79 of the Income Tax Act contains ‘Source Rules’ in subsection ‘a’ to ‘s’ upon which URA determines income sourced in Uganda.

79 (g) states that income is “derived from the disposal of an interest in immovable property located in Uganda or from the disposal of a share in a company the property of which consists directly or indirectly principally of an interest or interests in such immovable property, where the interest or share is a business asset.”

URA had imposed a CGT on the transaction on the ground that the disposal of Heritage’s interests in the exploration license, the Production Sharing Agreements (PSAs) and the Joint Operating Agreement (JOA) was a disposal of an interest in immovable property located in Uganda.

The court has ruled that this was erroneous since what was disposed of was movable property comprised of contractual rights under the PSAs and the JOA and rights to conduct exploration operations under the exploration license.

It is the ruling on the flawed tax computation that stands out however, seeing how hard it will hit the state coffers, with Abinyo stating that “the computation of the CGT excludes the sum of $150m which formed part of the cost base, and therefore not subject to tax.”

CGT is a tax on the profit when one sells or disposes of an ‘asset’ that has increased in value. It is the gain (profit) one makes that is taxed at 30%, not the gross amount received.

Represented by Denis Kusaasira, Festus Akunobera, Joshua Byabashaija and Steven Kabuye from ABMAK Associates, Advocates & Legal Consultants, Heritage successfully argued that the exploration costs of $150m formed part of the cost base (therefore, not a gain) and so should not have been taxed in URA’s computation.

The implication is that URA collected $45m excess tax being 30% of the $150m, wrongly included as part of taxable income. It is this that URA has been ordered to refund.

It does not end there, however, as the tax body will also chip in with an extra 2% ($900,000) per month in interest on the $45m, going back to April 7, 2011 when the excess tax was collected from Tullow Oil by way of an Agency Notice.

As of December 23, 2024 when the ruling was delivered, 165 months have since elapsed; bringing the interest due to Heritage to $148.5m. In addition to the excess tax, therefore, URA owes Heritage at least $193.5m, starting on the date of judgment.

Furthermore, court also awarded Heritage a quarter of the costs of the appeal, and in the TAT. According to the ruling, interest on these costs was set at a rate of 6% per annum from the date of the judgment until payment is made in full.

Background

Before the discovery of commercial deposits of oil and gas in 2006, Heritage together with Energy Africa (U) Ltd entered into PSAs with the Government of Uganda in relation to Exploration Areas 1 and 3A in the Albertine Graben. They were accordingly granted licenses for petroleum exploration, development, and production.

Energy Africa later sold its interests to Tullow, pursuant to which, Heritage and Tullow each held 50% participating interests in the exploration areas.

Heritage, one of the pioneer oil companies in Uganda, was to later make its own oil discoveries in Block 3A.

In a JOA between itself and Tullow, it was stated that in the event that either company wished to dispose of its 50% interest, the other had a right of pre-emption (that is, the first rights to buy the 50% shares owned by the exiting partner).

It is this right that Tullow exercised when Heritage chose to exit Uganda.

Subsequently the two companies entered into a Sale and Purchase Agreement (SPA) on January 26, 2010, by which Heritage sought to transfer its rights under the Petroleum Exploration Licenses for exploration areas in Uganda; it’s participating interests under the JOA and its rights under the PSAs, subject to the satisfaction of various conditions precedent.

The amount to be received by Heritage from Tullow in the transaction comprised of the base price of $1.35b, paid under the SPA, and an addition $100m paid under a supplemental agreement (which in the judgement is called a ‘contingency amount’)

In July of 2010, the Minister of Energy and Mineral Development consented to the sale of Heritage’s assets to Tullow on condition that whatever taxes accruing to the transaction were paid.

URA was later to ask Heritage to pay $404.925m on July 6, 2010 and $30m on August 19, 2010 in taxes in respect to the base purchase price, and the contingency amount respectively, as highlighted above.

However, Heritage objected to the first assessment on August 18, 2010 and to the additional assessment on August 19, 2010. URA followed this by issuing objection decisions on November 12, 2010 and December 1, 2010 in respect of the first assessment and the additional assessment respectively, and maintained the assessments for reasons that the transaction was subject to tax under the laws of Uganda.

Consequently, Heritage filed two applications in the Tax Appeals Tribunal (that is TAT Application No. 26 of 2010 on December 10, 2010 and TAT Application No. 28 of 2010 on December 31, 2010), challenging URA’s objection decisions in respect of its tax liability.

But the TAT dismissed both applications and upheld URA’s assessments.

Heritage being dissatisfied with the TAT’s decisions as well, sought redress at the High Court of Uganda under a consolidated appeal, that is Civil Appeal No. 23 of 2011 and Civil Appeal No.3 of 2012 – hence Abinyo’s ruling, last month.

Apart from grounds (1) and (3) in its Notice of Appeal referenced earlier, Heritage also noted in ground (2) that the TAT erred in law when it held that section 79 (s) of the Income Tax Act applied and in ground (4) that the TAT erred in law in failing to hold that there could be no tax liability by virtue of the “Convention between Mauritius and Uganda for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income” and section 88 of the Income Tax Act, even if (which is denied) there would otherwise have been a tax liability.

Grounds (5) and (6) stated that the TAT erred in law by failing to properly evaluate the evidence before it and also erred in law by saying URA’s assessments were validly issued, respectively.

Court, however, rejected these other grounds (2, 4, 5 and 6) – which ruling was in favour of URA.

The tax body was represented by Catherine Donovan Kyokunda jointly with Tonny Kalungi, Diana Prida Praff, Barbara Ajambo Nahone, Gloria Akatuhurira, and Charlotte Katutu from its Legal Services and Board Affairs Department.

The Error

So how did we end up here? URA appears to have calculated the tax due from the transaction as if it was computing Corporate Income Tax (CIT), since under such a regime Heritage would not have been permitted to deduct the exploration costs (of $150m) as this would be recovered under the PSAs’ cost recovery regime.

However, since Heritage was selling all its assets and rights and getting out of business in Uganda, it would not be able to claim any costs in future per the PSA guidelines. As such the applicable tax process in this case was the CGT regime where the $150m had to be added to the cost base (and therefore excluded from the ‘gain’ or profit).

The taxable gain should therefore have been computed by subtracting total deductions (the signature bonus and the exploration cost i.e. $250,000 + $150,000,000 = $150,250,000) from the base purchase price.

As such $1,199,750,000 (after subtracting $150,250,000 from $1,350,000,000) is the correct taxable gain that should have attracted a CGT of 30%. The correct tax therefore on the gain would have come to $359,925,000 (and not the $404,925,000 as computed by URA).

Therefore, the excess tax collected was $45m because the exploration cost of $150m was not deducted from the base purchase price when calculating the taxable gain, resulting in a higher taxable amount and consequently a higher tax liability.

Going Forward

As per the letter of the law, Heritage’s legal representatives, ABMAK, are expected to serve URA with a draft of the decree and thereafter the latter will be expected to comply with the judgement and the orders of the court.

Could URA choose to appeal, though? Denis Kakembo, the Managing Partner, Cristal Advocates, thinks so.

“Based on recent trends I do not think we are about to see the end of this matter. In practice either of URA or a tax payer who feels aggrieved by decisions of court are at liberty to exercise their right to appeal; even up to the Supreme Court,” he says.

That said, Kakembo is concerned that court decisions of this nature continue to delay.

“Since the TAT ruling, it has taken over a decade for court to reach a decision in this matter. Being commercial in nature however, tax matters should be handled expeditiously. The justice system surely can do better than this,” he says.

Probably this tendency of courts to delay justice could be why URA decides to appeal and therefore further postpone the refund process (especially since such hefty tax reimbursements distort the tax body’s annual revenue targets).

The downside of URA obtaining a stay of execution is that the interest (of 2% monthly) will continue running; meaning even more than the $193.5m (as of December 2024) will be paid to Heritage in case the tax body’s appeal is not successful.

Tullow exited Uganda in 2020

Tullow itself has since left Uganda after selling its stake to TotalEnergies in 2020. The question now is, were similar errors repeated by URA in the computation of the CGT in this transaction as well?

There is also the small matter of the $30m CGT collected on the contingency amount (of $100 million), which court upheld, but Heritage insisted was outside the taxable gain. Will it choose to challenge this again?

All these notwithstanding, at least one would argue that Abinyo’s measured judgement can go a long way in reassuring the business community – local and foreign – that they can find justice in Uganda courts even when aggrieved by the state.

“The oil industry is susceptible to risk, as we have come to find out since we discovered commercial deposits in Uganda. By courts avoiding emotion fueled or rushed decisions, they give would be investors the confidence to spend their money here,” said a legal scholar, who preferred anonymity.