Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Dec. 16 -- Tullow Oil PLC may try to block a plan by Heritage Oil PLC to sell its 50% interest in Ugandan Blocks 1 and 3A to Italy’s Eni SPA for as much as $1.5 billion, according to local media.
Tullow owns Blocks 1 and 3A jointly with Heritage and is the sole owner of Block 2. Altogether, the three blocks are estimated to contain at least 2 billion bbl of oil.
Last month, Heritage announced an agreement to sell to Eni its 50% working stake in Blocks 1 and 3A, which cover the northern and southern end of Lake Albert (OGJ Online, Nov. 24, 2009).
“Following a strategic review, we have decided to enter into this letter of intent with Eni as we recognize the very large multibillion dollar investment that is required to develop the Albert basin and the related infrastructure,” said Heritage Chief Executive Officer Tony Buckingham.
However, Uganda’s Daily Monitor newspaper reported Tullow Vice-Pres. Tim O’Hanlon as saying the entry of Eni into Uganda's petroleum industry was unfortunate and that his company would exercise its “right of refusal.”
O’Hanlon said the Heritage-Eni agreement had “short-circuited” a process started by Tullow to source a partner to help develop the Ugandan oil fields.
O’Hanlon said, “They [Heritage] have under our agreement to give us details of any deal they have entered. They have not. If they do and we can match the price, we have a right of preemption. This means Tullow will acquire those assets.”
He said, “We always suspected their plan to exit. We say good luck. But in the choice of partner for future development, Uganda needs a holistic process. One that guarantees transparency.”
O’Hanlon said while the Ugandan government approves or disapproves every agreement, the right of veto or preemption is a commercial matter and not a matter for the government to decide. “It’s purely a company-to-company affair,” he said.
Uganda’s commissioner for the Petroleum Exploration and Production Department Ernest Rubondo told the Reuters news agency that the government is aware of Tullow's intention to assert its right of refusal.
“Yes, Tullow has previously signaled to us of their intent to retain their partner's stake and we're watching. We'll discuss details when they come to us for approval of whichever firm is to take over their stake," he said.
Earlier this week, however, Uganda said it backed the proposed takeover by Eni as the country needs larger companies to help it exploit its oil reserves.
According to junior minister of energy and minerals Peter Lokeris the government fully supports Eni's plan because of the Italian company's expertise in oil production and refining.
Eni "is active in 70 countries around the world, including Angola, Ghana, Congo, Gabon, and Mozambique," Lokeris said.
Contact Eric Watkins at [email protected].
Photo from OKEA.
Rendering from Cedar LNG.
