TOO MUCH TWIST OF EVENTS REGARDING FREQUENT CHANGES OF THE TEAM OF INVESTORS IN THE UGANDA OIL AND GAS FIELDS AS FRESH CLAIMS EMERGE THAT TULLOW IS TO BUY OUT HERITAGE.
Business Feature by Leo Odera Omolo In Kisumu City.
There seems to be too much excitement over the newly discovered oil and gas fields in Uganda. The discoveries appear to have attracted many national and international firms, as evidenced by the frequency of announcements of ownership changes almost on a monthly basis.
Tullow oil, the London-based firm, exploring for oil and gas fields in Uganda, has once again offered to buy out its major partner, Heritage Oil.
Two fields, Block 1 and 3A in Western Uganda, are jointly owned by Heritage and Tullow in a 50-50 per cent joint venture.
Under the existing agreement, signed between the two, Tullow has the first option to buy, in case Heritage wants to sell – what is called pre-emptive rights.
But in a surprise move, Heritage in December last year entered into a deal to sell its stake to an Italian oil giant company, Eni, for USD 1.5 billion.
According to the deal, Eni would pay USD 1.35 billion in cash, and a further deferred consideration of USD 150 million in cash or take in a producing oilfield of a similar value within two years, subject to approval by the Uganda government.
The deadline set for Tullow to exercise its pre-emptive rights expired last Sunday 17th January 2010.
In a statement issued simultaneously in both London and Kampala, the company announced that it secured the money to match Eni’s offer, and will enter into a sale and purchase agreement with Heritage for the proposed oil fields.
“A syndicate of Tullow’s core relationship banks has provided the banking facilities required by Heritage shareholders at a meeting scheduled for January 25, 2010 and consent from the Ugandan government”, said the company.
The completion of the agreement is subject to certain conditions, including approval by the Heritage shareholders at a meeting scheduled on January 25th.
Tullow, which is in the process of identifying a partner for another oil field in Block 2, where it has a 100 per cent stake, said the interested companies approved the deal .
“The parallel exercising its pre-emption rights,Tullow has been running a transparent farm out process which has attracted a significant number of companies..”
“The process is now well advanced and identified oil companies, are supportive of the group decision to pre-empt..”, continued the company statement.
The company statement does not name the identified oil companies, but sources in Kampala said they include French’s Total, American giant Exxon Mobil and the state owned China National Oil Company.
“Tullow is committed to retaining a material stake in Uganda and continue to invest for the long term”, the company’s CEO, Mr Aidan Heavy is quoted in both London and Kampala as having said this.
“As we entered the development phase, we are working closely with the Ugandan government to introduce a mutually maintained partner, with downstream expertise, who is aligned with this long term approach”.
“Buying out Heritage and taking on board a bigger partner will enable the company to take care of the whole production chain, including the pipeline and refinery, “said Mr Heavy.
But informed sources within the business circles in the oil sector in Kampala, says reaching the final deal could take time, should the Italian oil giant offer a higher price, an option that is largely available to them.
Over the last six years, Tullow and Heritage have invested over USD 700 million in the Lake Albert Rift Basin, in Western Uganda.
“They drilled 27 wells to prove over 800 million barrels of oil, and identified the existence of over 1.5 billion barrels of potential yet to be explored”, the statement said.
Tullow offer came just days after the Italian Foreign Minister, Francis Frattini visited Uganda, and told President Yoweri Museveni that Eni is ready to invest billions of dollars in the Ugandan oil industry.
It also came at a time when visiting Libyan Trade delegation has expressed interest in the building of an oil refinery in Uganda.
Libyan government owns 2 per cent stake in Eni, and has announced that it planned to make it the second biggest shareholder after the Italian government.
Energy experts reckon that refining the oil locally would be much cheaper that exporting it as crude, considering the waxy nature of Ugandan oil.
Obviously, the Uganda business and government circles are viewing these twists of events, coming so rapidly, as spelling dooms and bad omen, considering the confusion and curse that the oil commodity has visited on several countries of the world, where it existed as the major source of earnings.
Ends