Kampala has approved Anglo-Irish independent Tullow Oil's bid to purchase Heritage Oil's 50% stakes in blocks 1 and 3A in Uganda, according to Peter Lokeris, the state minister for minerals. The decision paves the way for FTSE 100-listed Tullow to develop the fields in the west of the African nation. A probable partnership on the newly acquired blocks is set to be signed with China National Offshore Oil Corporation (CNOOC). Previously a final decision from the government was expected by mid-February.
Lokeris as reported to have states the country's senior oil ministry officials met President Yoweri Museveni on February 2 to consider the pre-emption right of Tullow and approved it. 'The decision is final,' he added. The government's granting approval for Tullow to exercise its pre-emptive rights and to acquire the stakes would give the company full control over the blocks and scupper a deal between Heritage and Italy's Eni.
Jersey-based Heritage had originally agreed to sell is half-share in Blocks 1 and 3A to Eni for $1.5 billion in November 2009, but Tullow announced back on January 17 that it had decided to exercise its rights to acquire Heritage's assets in Uganda for $1.35 billion in cash plus a deferred $150 million. Since then, Heritage's shareholders have approved a sale of the assets to either Tullow or Eni.
At first it appeared that the government favoured the Heritage-Eni deal, in order to avoid Tullow taking a monopoly and ensure the entry of an experienced and well-financed foreign company to the projects. However, with Tullow having since agreed that it would sell half of the interests in the blocks on to a bigger company without delay, the government seems to have moved its approval in Tullow's favour. CNOOC or French major Total are currently seen as the most likely contestants for the stakes.
Explorers discovered crude oil deposits in 2006 that they say could amount to billions of barrels of oil in the Albertine Graben, on Uganda's western border with the Democratic Republic of Congo. Production is expected to start later this year.
Following this high-profile contest for control of the Ugandan fields one thing is certain, Uganda's potentially lucrative oil fields are not longer the industry's best-kept secret.