Tullow Turns To Contractual Provision to Navigate Tax Issues

Tullow Oil on Monday said it had declared Force Majeure on its main licenses in Kenya, effectively allowing the company to work-around its tax issues within the law.

Force Majeure is a contract clause or provision that allows an individual or organisation cite unforseeable circumstances as a reason behind failing to honour obligation.

The British explorer now says it is locked in negotiations with the government on virus restrictions and tax changes announced by President Uhuru Kenyatta last month in response to the COVID-19 Pandemic.

“Tullow and its partners have called Force Majeure because of the effect of restrictions caused by the coronavirus pandemic on Tullow’s work program and recent tax changes. Calling Force Majeure will allow time for the Joint Venture and Government to discuss the best way forward,” Tullow said on Monday.

This comes one month after the company announced US$575 million sale of its entire stake in the  Lake Albert Development Project in Uganda to Total in a deal that allowed the company to restructure its ballooning debt.

Tullow executives have been wracking their brains trying to navigate their way through a USD2.8 billion debt that the company had accrued by the end of last year.

The company which has been on the spotlight for some of its projects in Africa including Kenya, has on multiple occasion been forced to defend its African projects as viable while maintaining it is in a healthy financial condition to take on mammoth projects.

In April, the company announced the appointment of Rahul Dhir as Chief Executive.

Mr. Dhir replaced Dorothy Thompson who had been filling in as Executive Chair following the resignation of his predecessor Paul McDade and Tullow Exploration Director Angus McCoss in December 2018 as the company scaled back on its production and suspended dividend payments.

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