$1.5b oil buyout endorsed
Publish Date: Feb 03, 2010
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By Ibrahim Kasita

THE GOVERNMENT has approved Tullow’s offer to buy out its partner Heritage, according to Peter Lokeris, the Minister of State for Mineral Development.

“We met on Wednesday and considered the pre-emption right of Tullow and approved it. The decision is final,” he said in a phone interview yesterday.

Two oil fields, blocks 1 and 3A in western Uganda, are jointly owned by Heritage and Tullow in a 50-50% joint venture.

“We appreciate what Tullow has done in finding the oil and we respect the sanctity of the law,” Lokeris said.

He explained that the decision was made because there was an initial agreement between Heritage and Tullow stipulating that if one wanted to dispose of its stake, the other partner had the first option to buy.

The approval ends a bid war that had emerged over who was to take over the oil fields. Heritage said in December it had agreed to sell its stake to Italian company Eni for $1.5b.

Tullow, however, exercised its right of pre-emption. It announced last month that it was willing to match Eni’s offer; and signed a sale agreement with Heritage for the proposed oil fields.

The deal was, however, still subject to the Government’s approval.

Lokeris yesterday said Tullow would be required to follow the Government’s conditions, such as paying taxes.

Energy ministry sources had told Sunday Vision that the other conditions included the level of the company’s investment in Uganda and avoidance of a monopoly situation.

The others, the sources said, were strong alignment with the Government interests, including early commercialisation of the petroleum resources, value addition and listing on the Ugandan stock market.

Tullow last month announced plans to list on the Ugandan stock exchange. The company also said it would start production of about 1,000 barrels of oil a day from Kasamene field in Buliisa district later this year.

Tullow’s boss Aidan Heavey also dismissed fears that they were creating a monopoly in the Albertine Graben.

“Tullow has no desire or intention to retain 100% of the interests in blocks 1, 2 and 3A,” the company wrote to Onek on January 19.

“Immediately upon our acquisition of the Heritage interests in blocks 1 and 3A, we will farm-down (sell) at least 50% of the interests in all three blocks to one or more partners acceptable to the Government.”

It added that the operatorship and other roles of the partners will be “fully discussed and agreed with the Government”.

Recently, the bosses of the state-owned China National Off-shore Oil Company met President Yoweri Museveni in Uganda and expressed interest in investing in Uganda’s oil and gas industry.

Tullow has indicated that the Chinese company and French Total would be their preferred partners to build a refinery and pipeline.

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