By Ibrahim Kasita
The Government has backed Eni, an Italian oil giant, to buy into Heritage’s $1.5b oil fields to avoid a monopoly, minister Hillary Onek said yesterday.

“The Government supports the Heritage-Eni deal and any other process provided it does not create a monopoly, enhances early production and value-addition,” Onek, the Minister of Energy told journalists in Kampala.

The announcement comes after Heritage Oil, a firm exploring for oil and gas in Uganda, agreed to sell its stake to Eni.

According to the deal, Eni would pay $1.35b and a further $150m or a stake in a producing oil field of a similar value within two years, subject to approval by the Ugandan Government.

Two oil fields, blocks 1 and 3A in western Uganda, are jointly owned by Heritage and Tullow.

The two also had agreed that if one of them wanted to dispose of its stake, the partner had the first option to buy – what is called pre-emptive right.

The Italian foreign minister visited Uganda recently and pledged that his government was ready to invest in Uganda’s oil sector through Eni.

At the same time, Libyan officials have also been in Uganda and indicated interest to invest in an oil refinery in Uganda. Libya owns a stake in Eni.

However, Tullow announced on Sunday its decision to pre-empt the Eni deal by buying out Heritage.

The company also said it would introduce a partner which has expertise in building refineries and pipelines. It denied that the buy-out of Heritage would turn it into an oil monopoly.

Onek said he was aware of the developments.

“The pre-emption right is a private affair between the two companies and government is not party to that agreement,” he explained.

“Why are they pre-empting now when the Heritage-Eni deal is in advanced stages? “If they become an obstacle and delay oil production I will not hesitate revoking their licence in the interest of Uganda.”

Calling Tullow’s pre-emption as “mortgaging this country,” the minister said it was not strategic to keep one company operating in Lake Albert “as this would create a monopoly situation.”

“They (Tullow) have failed the early production scheme which was supposed to be in place last year,” he complained.

He said the company was supposed to carry out more exploration drills but they failed because of “lack of competition”.

Onek said the Government would only approve transactions which are in line with its policies. “Oil companies are licenced by the Government to develop the oil resources on behalf of the Government and are allowed to recover their costs and get a return on their investments without compromising the interest of the country,” he said.

He explained that oil, like all other mineral resources, belong to the people of Uganda and the Government must ensure that they are developed for their benefit.

In line with this, Onek said, the Government would support Tullow’s intention to sell part of its interest in Uganda in order to attract additional capital to the industry.