UGANDA: Energy Minister affirms support for Heritage and Eni oil deal and says will block Tullow's pre-emption

Record ID: 344055

  • Title: UGANDA: Energy Minister affirms support for Heritage and Eni oil deal and says will block Tullow's pre-emption
  • Date: 22nd January 2010
  • Summary: LAKE ALBERT, UGANDA (FILE) (REUTERS) VARIOUS OF OIL EXPLORATION SITE
  • Embargoed: 6th February 2010 12:00
  • Keywords:
  • Location: Uganda
  • Country: Uganda
  • Topics: Energy
  • Reuters ID: LVA5G0UCS8LR738KIFWGEUSUG0FF
  • Story Text: Uganda said on Thursday (January 21) it would favour a bid from Italy's Eni over one from explorer Tullow Oil for stakes in the country's main oilfields, saying the deal would give Tullow a monopoly of the country's oil industry.
    Analysts said the decision threw Tullow's plan to develop the fields into doubt and suggested Tullow's relations with the government might have turned frosty.
    Energy minister Hillary Onek criticised Tullow's exercise of a pre-emption right blocking an agreed sale of half-shares in Block 1 and 3A to Eni by Heritage Oil.
    "Government received the proposed sale of Heritage assets to Eni and has been informed of Tullows pre-emption of this transaction, the government position is the government supports Heritage/Eni farm in, farm out process," he said.
    Onek said they would not encourage a monopoly in the handling of the oil sector.
    "So if for example now Heritage draws out and Tullow takes all the three zones, in fact that would be over 80 or 90 percent of the Ugandan oilfield, and you give it in the hands one company. So, what does it mean? Total monopoly, and therefore creates no competition and all the vices which accompany monopoly and monopoly here means they can dictate what ever terms," said Onek.
    He also said the government would punish any firm which delayed the development of the east African nation's nascent oil sector.
    Uganda is poised to become a significant oil producer, after a deal with Italian energy giant Eni last year offered billions of dollars of fresh investment to develop newly discovered oilfields.
    Eni agreed to buy a stake in two large oil exploration blocks in Uganda for up to 1.5 billion US Dollars.
    Oil was first discovered in the region in the 1920s in the Albertine Graben -- the northern most part of the East Africa Rift system -- and the first well was sunk in 1938. But World War Two and political instability in Uganda between 1940 and the 1980s meant there was limited exploration.
    The search for hydrocarbons began in earnest in the 1990s after a return to political and economic stability following President Yoweri Museveni's ascent to power.
    Uganda now has nine exploration blocks from its northern border with Sudan through Lake Albert on the western border with the Democratic Republic of Congo and south to Lake George.
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