Tullow Oil PLC (TLW.LN) said Tuesday it has signed an agreement to buy Heritage Oil PLC's (HOIL.LN) Ugandan oil assets for up to $1.5 billion, pre-empting Heritage's previous sale agreement with Eni SpA (E) and eliminating the possibility of a rival offer.
Tullow Oil PLC (TLW.LN) said Tuesday it has signed an agreement to buy Heritage Oil PLC's (HOIL.LN) Ugandan oil assets for up to $1.5 billion, pre-empting Heritage's previous sale agreement with Eni SpA (E) and eliminating the possibility of a rival offer.

The deal remains subject to approval of the Ugandan government, which will now make the final decision over which company will lead development of Lake Albert --a major new oil province where around a billion barrels have already been discovered. The government has yet to give clear public backing to either Eni or Tullow to take over the assets.

Eni declined to comment.

Ernest Rubondo, the head of Uganda 's petroleum production and exploration department said the government expects to get details of the Heritage-Tullow agreement tomorrow and will thereafter decide whether Eni or Tullow should acquire the assets.

Heritage owns a half share in oil license blocks 1 and 3A in Uganda 's Lake Albert region where the oil discoveries were made. Tullow owns the other half of those blocks and 100% of block 2, where the largest single oil field has been found. Acquiring Heritage's assets will give Tullow 100% ownership of the Lake Albert oil licenses.

Heritage's shareholders voted to approve a sale to either company Monday.

"Tullow will now work closely with Heritage and the Government of Uganda to expedite the approval process which is expected to be completed in the first quarter of 2010," the company said in a statement.

Uganda 's President, Yoweri Museveni, had a positive meeting with Tullow Friday and was supportive of the company's contractual right to preemptively purchase the Heritage assets, the head of Tullow Oil Uganda , Brian Glover, said Saturday.

However, Uganda 's Minister of Energy and Minerals, Hillary Onek, last week gave his backing to Eni and said the government has the right to veto Tullow's pre-emption if it believes Tullow would gain a monopoly over Uganda 's oil resources.

Political analysts say Museveni will have the final say on the matter and can overrule his cabinet.

Tullow has dismissed the monopoly concern, saying it will not retain full ownership of the assets and will quickly sell up to half of the three blocks to one or two other major oil companies who can assist in the development of infrastructure, including a 1,200 kilometer export pipeline and refinery.

"Tullow is currently discussing preferred partners with the government and expects to complete this transaction in parallel with the purchase from Heritage," the statement said.

ExxonMobil Corp. (XOM), Total SA (TOT) and China National Offshore Oil Corp. (CEO) are among Tullow's most likely Uganda partners, people familiar with the matter have told Dow Jones Newswires.

Museveni met with representatives of Cnooc Monday to discuss its potential involvement in Uganda 's oil sector, a Ugandan official with knowledge of the matter said Tuesday. Museveni said Cnooc is welcome to enter the country's oil sector, the President's office said in a statement.

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