CNOOC Ltd's selection follows a long-running bid process instigated by UK-listed Tullow after appraisal wells confirmed the presence of around 1 billion barrels of oil in Uganda's Lake Albert region.

Sources with direct knowledge of the deal declined to give further details on the agreement with Tullow to Dow Jones, saying statements would be issued by both parties later.

A spokesman for Tullow told the news agency "no agreement has been signed with any company at this stage".

He added: "Tullow won't reach an agreement with any company until the process has been completed with the government of Uganda."

Tullow boss Aidan Heavey said late last month its new partner would entirely fund the development of a 1200-kilometre pipeline to export Uganda's oil to the Kenyan port of Mombasa.

Last month, Tullow said it would bring either French giant Total or CNOOC in as a partner to develop the Ugandan fields.

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. he added Tullow would lead exploration and upstream development in the Lake Albert area.

The deal comes after the government of Uganda approved Tullow Oil's purchase of Heritage Oil's 50% stakes in blocks 1 and 3A yesterday.

That decision ended Italian player Eni’s attempt to obtain the assets.

UK-based Heritage agreed in December to sell its stakes in the blocks to Eni for up to $1.5 billion, but Tullow exercised its rights to buy the assets at the same price.

Tullow and Heritage share ownership of the two blocks on Lake Albert, and Tullow owns all of Block 2.

Uganda expects to start oil production in the next two to three years.

The country plans to produce around 150,000 barrels of oil per day within six years, most of which will be exported.

Published: 05 February 2010 17:49 GMT  | Last updated: 08 February 2010 08:05 GMT