Shares in Tullow Oil LON:TLW were on the march again last week after a key ruling in the oil company’s ongoing dispute with Ghana’s tax authority. Tullow Oil shares have popped nearly 25% on the back of the news. Ahead of the market open on Monday they were trading at close to 24p.
The International Chamber of Commerce (ICC) last week delivered its tribunal’s award with regard to the application of Branch Profit Remittance tax (BPRT) to Tullow Oil’s operations under the Deepwater Tano and West Cape Three Points Petroleum Agreements, offshore Ghana, which include the Jubilee and TEN fields.
The tribunal determined that BPRT is not applicable to Tullow Ghana since it falls outside of the tax regime provided for in the Petroleum Agreements.
As a result of the tribunal’s award, Tullow Ghana is not liable to pay the $320 million BPRT assessment issued by the Ghana Revenue Authority (GRA) and will have no future exposure to BPRT in respect of its operations under the Petroleum Agreements.
The decision is a shot in the arm for Tullow Oil, taking considerable pressure off the oil company’s balance sheet.
Tullow Oil continues tax dispute with Ghana government
Tullow continues to engage with the government of Ghana on two further disputed tax claims, which were referred to the ICC in February 2023, with the aim of resolving these disputes on a mutually acceptable basis.
Tullow Chief Executive Officer, Rahul Dhir, said last week:
“We are delighted with the outcome and decision of the Tribunal, which affirms our assessment and removes a material overhang from our business. We have continuously had confidence in the sanctity of our petroleum agreements and the dispute resolution process, which has now brought certainty to all parties. I look forward to constructive discussions with the government of Ghana to resolve the remaining claims so that our collective focus remains on maximising value from the Jubilee and TEN fields”.
Tullow Oil continues to dispute some other tax assessments with the government of Ghana. The assessments relate to the disallowance of loan interest deductions for the fiscal years 2010 – 2020 and proceeds received by Tullow Oil under Tullow’s corporate Business Interruption Insurance policy.
Further requests for arbitration
Tullow Oil has filed requests for arbitration in accordance with the dispute resolution process set out in the petroleum agreements which govern TGL’s activities in Ghana.
Tullow has said its considers that the further two disputed tax assessments, which total $387 million plus penalties, breach TGL’s rights under its petroleum agreements.
The company said it believes that resolution through international arbitration will bring further certainty. Tullow has previously said it intends to continue to engage with the government of Ghana, including the GRA, with the aim of resolving these disputes on a mutually acceptable basis. The new ruling could provide the company with additional leverage in this respect.
TGL had received a revised corporate income tax assessment for $190.5 million from the GRA relating to the disallowance of loan interest for the fiscal years 2010 – 2020. Tullow has previously disclosed assessments by the GRA relating to the same issue; the revised assessment received by the oil company in December 2022 superseded all previous claims.
TGL originally received a corporate income tax assessment and demand notice for $196.5 million from the GRA relating to proceeds received by Tullow during the fiscal years 2016 – 2019 under Tullow’s corporate Business Interruption Insurance policy, which was previously referred to in Tullow’s trading update on 25 January 2023.
