In a bid to promote transparency in the petroleum sector, Tullow Oil Plc has committed to publish all payments to the Uganda government and other stakeholders.
Irish firm Tullow, one of three companies exploring for oil in Uganda, made the commitment in a new 188-page financial report unveiled on Monday. Tullow has a portfolio of over 150 licences in 24 countries across the world, 14 of these in Africa.
According to the report last year, Tullow paid Ugandan government $4.1 million (approximately Shs 10bn) in income taxes and licence fees. This is comparably low to what Tullow paid to government and other stakeholders in 2012 when it first made disclosures.
In 2012, Tullow paid government a total of $175 million (approximately Shs 448bn) in taxes, wages and licences among others. The hefty payment in 2012 is attributed to the farm-down that Tullow had with Cnooc and Total in February 2012 that attracted a lot of taxes.
To break it down, the company paid $31 in valued added tax, pay as you earn and withholding tax, $2.6m in land rentals and training allowances, $4.8 million on social projects and $2.6m to 'other government payments'.
The company also spent $47.5 million on local supplies and $44m in salaries to Ugandan staff. A report by the ad hoc committee of parliament set up to investigate corruption allegations in the oil sector in 2011, reveals that Uganda has so far received Shs 1.8 trillion from 2000 to 2012 mainly from signature bonuses, licences, taxes and other payments.
In Kenya, Tullow paid a total of $71 million to government in value added tax, withholding tax, pay as you earn and local suppliers among others.
Announcing the policy, Simon Thompson, the Tullow chairman, said: "Oil is not a renewable resource, but it is a remarkable source of wealth creation that can kick-start a country on the path to sustainable economic growth. However, for oil wealth to be a blessing, it must be well managed, and transparency is a critical first step towards achieving this."
He added: "We support revenue transparency and disclosure as a means of providing a country's citizens with information to enable them to hold their government and, equally as importantly, to hold Tullow as a business, to account. Transparency also creates the opportunity to more effectively manage expectations of what socio-economic impact the discovery of oil can have and over what time frame," he announced.
Tullow's voluntary disclosures are being released in advance of a new EU law, due to come into force in the UK in 2015, that will require EU oil, mining and logging companies to publish their payments to governments on a project-by-project basis.
In Uganda, senior Ugandan politicians were accused of accepting bribes from the oil sector, but the allegations were later found to be unfounded. Thompson lauded Ghana for leading the transparency campaign in the oil sector. In Ghana, he said, every after three months government publishes the number of barrels of oil received from the Jubilee field and data is independently verified by the multi-stakeholder Public Interest and Accountability Committee (PIAC).
This level of transparency has helped to manage expectations, particularly when it was less than anticipated prior to the successful remediation of the field in 2012. It has also encouraged a lively public debate on how the country's oil wealth should be managed.
Ian Springett, Tullow's chief financial officer, said revenues from natural resources could, and should have a transformative effect on the development prospects of emerging economies.
"This [disclosure of payments] helps to mitigate any potential for corruption or dissipation of the benefits that natural resource can bring," he said.
The disclosures deal a heavy blow to a lobbying campaign being waged by some of Tullow's industry competitors to keep revenue payments secret. The move has been welcomed by transparency lobbyists in the oil sector. Dominic Eagleton, a senior campaigner with Global Witness, said Tullow's welcome disclosure blew a hole in the argument made by some oil companies that project-level reporting would impose a heavy burden on business.
Godber Tumushabe, a former executive director at the Advocates Coalition for Development and Environment (Acode), one of the civil society organisations advocating transparency in the oil sector, welcomed Tullow's decision to disclose payments.
"It is a very interesting development. I commend Tullow for that decision and urge other companies to do so" he said.
Pressure could now mount on the other firms, Total E&P Uganda Ltd and Cnooc, to emulate Tullow.