Museveni weighs up Heritage options

UGANDA IS STILL looking at proposals from both Tullow and Eni as the US$1.5bn tussle between them for Heritage Oil's assets in the East African country continues without resolution.

President Yoweri Museveni said in a statement that he was mulling proposals from both sides, including a plan by Tullow to bring in China National Offshore Oil Corporation (CNOOC) as a partner. Heritage has agreed to sell its half-share in Blocks 1 and 3A on the Ugandan side of Lake Albert to Italy's Eni for up to US$1.5bn in December. But Tullow, which owns the rest of the two oil blocks, exercised a pre-emption right last week.

"President Museveni said that the government will discuss all proposals by companies operating in the oil and gas sector adding that the country looks forward to welcoming new companies," Museveni's office was quoted as saying. "The government of Uganda will reach a decision in the coming weeks on the current process of pre-emption that will respect the contractual rights of the existing companies," it added. However, analysts said a conclusion could be some way off. "It looks like this transaction will drag on and on," Peter Hitchens, oil analyst at Panmure, said..

Tullow has said it wants to buy the assets, bundle them with half of its 100 per cent in Block 2, and offer the package to one or two investors. A source familiar with the matter said Tullow has selected CNOOC, although France's Total was also on the final shortlist of potential candidates that was forwarded to the government for approval. CNOOC officials met Museveni on Monday, and "expressed interest in joining Uganda's oil and gas sector by partnering up with Tullow", the statement from Museveni's office said.

The source said officials from Total would also meet the government this week but added: "CNOOC are the first choice". Eni said it would cost around US$13bn to bring the Ugandan fields on stream as full-scale production would require the construction of a pipeline to the Kenyan coast, a power plant and other infrastructure. Shareholders in Heritage overwhelmingly backed the sale of the assets to either Eni or Tullow Oil, at an extraordinary general meeting held recently..

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