Ugandan oil deal blocked

Britain’s Tullow Oil PLC will
exercise its pre-emptive right to buy 50 per cent of two Ugandan oil fields
from Heritage Oil PLC for $1.5 billion, potentially blocking a bid by Italy’s
Eni SpA.

Tullow and Heritage each own a half
share in the two fields in the oil rich Lake Albert Basin and Heritage had
agreed in November to sell the stake to Eni for up to $1.5 billion.

But under the terms of Tullow and
Heritage’s joint exploration venture, Tullow had the right to pre-empt any
offer for Heritage’s half by matching the price offered by any other bidder.

The Ugandan government will be the
final arbiter after shareholders vote on the proposal at a meeting scheduled
for 25 January.

Tullow said it has tapped its
bankers to match Eni’s offer of $1.35 billion cash and a deferred payment of
$150 million in either cash or an interest in a producing oil field.

“Tullow is committed to
retaining a material stake in Uganda and to continue to invest for the long
term,” the company said in a statement. “As we enter the development
phase we are working closely with the Ugandan government to introduce a
mutually beneficial partner with downstream expertise who is aligned with this
long term approach.”

Eni had hoped the acquisition would
be part of its expansion in sub-Saharan Africa. It also has interests in
Angola, Nigeria, Gabon, Mozambique and the Republic of Congo.