Eni pulls out of Uganda oil deal
Uganda - Corporate - 02-08-2010

Eni SpA has pulled out of its planned USD 1.5bn purchase of Heritage Oil Plcquotes Ugandan assets in what is a setback for the Italian oil groupquotes ambitions to grow in Africa to boost flagging output. quoteEni today revoked the sale and purchase agreement signed on 18 December 2009 for the acquisition of Heritagequotes 50% share in Ugandan Blocks 1 and 3A, on which Tullow Oil has exercised its preemption right,quote an Eni spokesman said on 5 February 2010. Earlier four sources familiar with the situation said that Eni had withdrawn from the planned deal. They said Eni can withdraw without paying any break up fees. Eniquotes decision reflects surrender in the hotly contested battle for the fields, which executives say contain around 2bn barrels of oil, and victory for explorer Tullow Oil Plc, which plans to sell the assets on to Chinaquotes CNOOC Ltd. The resources originally earmarked for the initiative will be rechanneled to other development projects, quoteincluding the two new projects of Zubair in Iraq and Junin 5 in Venezuela on which the company has high expectations,quote the Eni spokesman said.
Eni which is already an operator in Angola, Ghana, Nigeria, Congo, Gabon and Mozambique is targeting Africa to help it lift output. In October, Eni cut its oil and natural gas output target for the full year to fall in line with 2008quotes 1.797m barrels of oil equivalent per day. It had hoped that Uganda would become an important new beachhead in Africa and enlisted the support of Italyquotes Foreign Minister Franco Frattini, who travelled to Kampala to press Eniquotes case. Tullow and Heritage control 3 oil blocks that cover the Ugandan side of Lake Albert, but the explorers lack the technical skill and resources to develop the complex project alone. Eni agreed in December 2009 to buy the interests from Heritage, for USD 1.35bn in cash immediately and a further deferred payment of either USD 150m or an interest in another oil producing field independently valued at a similar amount. Tullow wants Heritagequotes half-share of Blocks 1 and 3A so it can attract a partner of its own choosing without reducing its own interests too much. It has selected Chinaquotes CNOOC as its preferred partner to buy Heritagequotes assets and half of Block 2.
The planned acquisition, in which Tullow would match Eniquotes bid, also gives the London based company operatorship of the 2 blocks. It already has operatorship of Block 2, which it owns solely. Ugandaquotes State Minister for Minerals Peter Lokeris said on Thursday that Kampala had approved Tullowquotes preemption of the sale. Jersey based Heritage plans to use the proceeds of the sale to develop its new discoveries in Iraqquotes semiautonomous Kurdish region, and Eniquotes withdrawal reduces the risk that the sale will be further delayed. Ugandaquotes parliament will begin inquiries next week into production sharing agreements after activists complained that the deals reached by the government give a disproportionate chunk of the proceeds to foreign firms.

Source: Reuters