Uganda stake on the block: Tullow looks for partners after Heritage buy.
Tullow shopping Uganda stake
Development of Uganda's fledgling oil sector looked set to kick into a higher gear today as UK-based Tullow Oil said it would bring either Totalor China National Offshore Oil Company as a partner into the country, and raised extra funds for African investment.
The move signals Tullow's confidence that it will successfully acquire Heritage Oil’s Uganda oil assets for up to $1.5 billion - pre-empting a previous sale agreement with Italy's Eni - and accelerate the commercial development of around one billion barrels of oil discovered in Uganda's Lake Albert region.
Ugandan government approval for that pre-emption is still pending, but President Yoweri Museveni has clearly stated that the government will respect Tullow's contractual rights in this case, Tullow boss Aidan Heavey said in a Dow Jones Newswires report.
Uganda's government has shown signs of splits over whether to let Tullow or Eni take over the Heritage assets.
The Minister of Energy and Minerals, Hilary Onek, publicly backed Eni last week and wrote to inform Tullow that the government would veto its pre-emption rights, according to a letter seen by Dow Jones Newswires.
The government has since rescinded this decision, people familiar with the matter told Dow Jones Newswires.
If its pre-emption is successful, Tullow will own 100% of the three license blocks containing the Lake Albert oil discoveries.
Half of these blocks would then be sold on to either Cnooc or Total, both of whom are committed to entering Uganda, Heavey said.
Cnooc, Total and Eni declined to comment Wednesday.
"We are happy with both companies, they are top class...absolutely superb at midstream and downstream development," Heavey said.
Tullow is working closely with the government to decide which company would be the best partner and a final decision is expected mid-February, he added.
"The plan is to accelerate very quickly the development of the Lake Albert basin," Heavey said, adding that the Ugandan government is considering proposals that would allow for a significant increase on the 150,000 barrel per day plateau production profile currently planned for the region.
Tullow's new partner would entirely fund the development of a 1200 kilometre pipeline to export Uganda's oil to the Kenyan port of Mombasa.
The downstream development plan is also likely to include a refinery, the size of which will be determined by a feasibility study in late March or early April, Heavey said. Tullow would lead exploration and upstream development in the Lake Albert area, he said.
Heavey would not comment on financial terms of the deal.
Following the sale, Tullow will likely be left with a larger stake in the Lake Albert blocks than it had previously planned, resulting in additional capital expenditure of up to $600 million over the next three years, Tullow said in a statement.
Tullow will also spend an extra $100 million in Ghana over the next 12 months, after an appraisal well last week that showed the offshore Tweneboa field to be a significant oil and gas condensate reservoir.
Tullow expects its capital budget this year to be $1.6 billion.
