Eni bows to Tullow, pulls out of Uganda agreement

Heritage Oil PLC said ENI International BV terminated “with immediate effect” its previous agreement to buy with Heritage’s interest in Blocks 1 and 3A in Uganda.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 8 -- Heritage Oil PLC said ENI International BV terminated “with immediate effect” its previous agreement to buy with Heritage’s interest in Blocks 1 and 3A in Uganda.

An Eni spokesman said, “Eni today revoked the sale and purchase agreement (SPA) signed on Dec. 18 for the acquisition of Heritage's 50% share in Ugandan Blocks 1 and 3A...”

Heritage said the termination followed Tullow Uganda Ltd.’s exercise of a pre-emption right with respect to the transaction and was allowed under the terms of the Eni SPA.

Heritage said Eni’s termination should expedite completion of the SPA entered into between Heritage and Tullow on Jan. 26, which is on the same terms and conditions as the Eni SPA.

In December, Eni agreed to purchase the interests from Heritage for $1.35 billion in cash and a deferred payment of $150 million or an interest in another oil-producing field valued at the same amount.

As a result of Eni’s withdrawal, Tullow stands to become the sole owner of Blocks 1, 2, and 3A, which hold reserves estimated at more than 1 billion bbl of oil.

A formal request for the Ugandan government’s consent to transfer the disposed assets to Tullow was submitted Feb. 2, and the transaction is expected to close within the first quarter.

Tullow wants Heritage's 50% share of Blocks 1 and 3A to attract a partner of its own choosing without reducing its own interests too much. With Tullow ready to acquire the acreage, the stage is set for the entrance of other players.

Tullow indicated it plans to bring in a partner to help with development of the Ugandan assets and also with construction of downstream facilities, such as a refinery and an export pipeline. Tullow Chief Executive Aidan Heavey last month said the firm’s new partner would entirely fund development of a 1,200-km pipeline to export Uganda's oil to Mombasa.

Heavey also said the downstream development plan is likely to include a refinery, the size to be determined by a feasibility study in late March or early April (OGJ, Jan. 28, 2010)

Meanwhile, there has been no confirmation of reports late last week suggesting China National Offshore Oil Corp. and Tullow are on the verge of signing a $2.3-$2.5 billion deal that would pave the way for the Chinese firm’s entry into the project.

Contact Eric Watkins at hippalus@yahoo.com.

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