Wednesday, January 27, 2010

Uganda Reverses Decision To Block British Oil Bid


Uganda backed down from a pledge to bar Tullow Oil from
acquiring more oil fields after the British firm presented the
president with a choice of Chinese, French and US partners,
officials said Tuesday.

State Minister for Investment Aston Kajara told AFP that senior
Tullow executives met President Yoweri Museveni in his office on
Monday to discuss the fate of the east African country's
much-coveted oil fields.

"Tullow presented a proposal to his excellency the president
which revealed they had a number of partners interested in
developing oil in Uganda," he said.

Kajara listed China's state oil giant CNOOC, France's Total and
US company Exxon Mobil as partners it could bring in to develop the
oil fields, if it was allowed to buy the assets of its Canadian
partner Heritage Oil.

Tullow and Heritage control much of Uganda's confirmed oil
reserves in a 50-50 partnership. Tullow by itself also owns a
separate oil field zone.

When Heritage announced its desire to sell its share, Tullow
invoked a previously negotiated pre-emptive right to buy out the
Canadian company and made a bid of 1.35 billion dollars.

Tullow's move to swallow up Heritage's assets had sparked
Ugandan fears that the British group would secure a virtual
monopoly over the country's oil fields and drew a pledge by Kampala
to support a rival bid by Italian group ENI.

"We haven't vetoed yet, but our statement is very clear that we
shall not allow a process that will promote monopoly and therefore
we support the Heritage-ENI transaction," Energy Minister Hillary
Onek had said last week.

ENI chief Paolo Scaroni even told Italy's La Repubblica daily on
Monday that his group was planning to invest 13 billion dollars
(9.2 billion euros) to develop hydrocarbons in Uganda after
acquiring Heritage's rights.

But Information Minister Kabakumba Matsiko told AFP Tuesday that
Uganda had not made a final decision to block Tullow's bid.

"The final decision is a process and government has not yet
reached a final decision," he said.

Kajara suggested that Museveni and the Tullow executives ironed
out their differences during Monday's meeting at State House.

"They said they wanted to remain working in this country and
wanted to involve other partners who have experience in developing,
refining and pipelines," he said.

"The president listened to them and he advised that Onek should
retract that letter," he said, referring to a letter the energy
minister sent to Tullow to inform them that the government
objections were final.

The latest estimates suggest that Uganda's northwestern Lake
Albert region holds two billion barrels of oil.

Expectations for Uganda's embryonic oil sector are for a
refinery with a capacity of 150,000 barrels per day, with
production predicted to ramp up to that level between 2014 and

The prospect of seeing a British firm secure a stranglehold on
the industry has sparked concerns among some commentators and
officials that their country was being "re-colonised".

"Some of these oil companies are behaving as if they own the
oil. They don't. These are resources that belong to the
people of Uganda," Onek said last week, echoing those concerns.

But several Ugandan analysts have said that Museveni is anxious
to reap some benefit from Uganda's oil reserves before the upcoming general elections, scheduled for early next year.

They argue the president would be drawn by a bid that offers
Uganda significant cash upfront, before any oil is pumped.

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