Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Jan. 28 -- Tullow Oil PLC said its subsidiary Tullow Uganda Ltd. has entered into a sale and purchase agreement (SPA) with Heritage Oil & Gas Ltd. (HOGL) and Heritage Oil PLC to purchase their entire interest in Blocks 1 and 3A in Uganda.
“The terms of the transaction include a consideration of $1.35 billion cash and a further contingent, deferred consideration of up to $150 million cash, or an interest in a mutually agreed producing oil field independently valued at a similar amount,” Tullow said.
The SPA contains various conditions, including the approval of Tullow Uganda as the purchaser by the government of Uganda. Tullow said it will work closely with Heritage, HOGL, and the Ugandan government to expedite the approval process, which is expected to be completed in the first quarter.
In parallel with the HOGL asset purchase process—and with government support—Tullow said it has been running “a transparent farmout process, which has attracted interest from major international and national oil companies.”
Tullow said it is currently discussing preferred partners with the Ugandan government, and expects to complete this transaction “in parallel with the purchase from HOGL and Heritage.”
Meanwhile, the Ugandan government said it will decide next week on the sale of Heritage’s stakes to Eni SPA or Tullow.
Last November, Heritage agreed to sell its Ugandan interests to Eni SPA for as much as $1.5 billion (OGJ Online, Nov. 24, 2009). Tullow responded by saying it might try to block the Heritage plan (OGJ Online, Dec. 16, 2009).
At the moment, the decision over Tullow or Eni is still up in the air, according to a statement by the Ugandan president’s office, which said, "Government officials will discuss all the proposals by companies operating in the oil and gas sector and look forward to welcoming new players.”
The reference to new players followed reports that Tullow has offered the Ugandan government two potential partners once the sale from Heritage is complete: China National Offshore Oil Corp or Total SA.
If the government approves Tullow’s preemption of Eni, the firm will own 100% of the three license blocks, and would be in a position to sell portions of the blocks to CNOOC or Total.
According to Tullow Chief Executive Officer Aidan Heavey, the firm’s new partner would be responsible for funding the development of a 1,200-km pipeline to Kenya’s Port of Mombasa for the export of Uganda’s oil to world markets.
Heavey also said the development plan will likely include construction of a refinery. He said the size of the facility, a matter of considerable concern to the Ugandan government, will be determined by the outcome of a feasibility study to be completed in late March or early April.
Contact Eric Watkins at [email protected].