The Ugandan government will reach a decision next week on whether to back Italy-based Eni SpA's (E) proposed $1.5 billion takeover of the interests of the London-listed Heritage Oil PLC (HOIL.LN) in two exploration blocks, or allow pre-emption of the sale by the U.K.-based Tullow Oil PLC (TLW.LN), state house said late Tuesday.
President Yoweri Museveni and other government officials will discuss the proposals of all companies operating in the sector and those intending to enter, and come up with a decision in the coming week, according to a statement seen by Dow Jones Newswires.
Only competent firms will be allowed in the sector, and the government will "respect the contractual obligations" of existing companies.
Heritage and Tullow jointly own Blocks 1 and 3A and Tullow is the sole owner of Block 2. Up to 1 billion barrels have been discovered in the three blocks.
Tullow announced Tuesday it had reached an agreement to buy Heritage's Ugandan oil assets for up to $1.5 billion, pre-empting Heritage's previous sale agreement with Eni.
According to Ernest Rubondo, the head of Uganda's Petroleum Exploration and Production Department, the government will study the development proposals of both Tullow and Eni and come up with an informed decision as the country moves close to the start of oil production.
Tullow has presented a list of potential partners including Exxon Mobil Corp. (XOM), Total SA (TOT) and China National Offshore Oil Corp. (CEO).
Museveni met with executives of Cnooc Monday to discuss its potential involvement in the country's oil sector.
The government has also rescinded the earlier decision of Hilary Onek, minister of energy and minerals development, to stop the sale of Heritage's stake in two blocks to Tullow Oil, following a meeting between Museveni and Tullow's chief executive, Aidan Heavey, on Jan. 23, according to people familiar with the situation.
In a letter dated Jan. 20, Onek had informed both Heritage and Tullow the sale won't be approved by the government.
"This is to inform you...that the government has come to a final conclusion it's not prudent or in the best interests of Uganda to approve a transfer of Heritage's participating interest in exploration areas 1 and 3A to Tullow," he wrote in a letter obtained by Dow Jones Newswires.
The government will now decide whether Eni or Tullow should be allowed to take over the interests of Heritage, according to officials.
Uganda is expected to start oil production in the next two-three years.