Tullow confirmed yesterday it had served notice on Heritage, which had previously agreed to sell the assets to Italian oil firm Eni, though the eventual outcome of the deal lies in the hands of the Ugandan government.
If the deal goes ahead, Tullow is set to seal a secondary deal to sell off a stake in the fields to another international oil major, with US giant ExxonMobil considered by analysts to be the overwhelming frontrunner.
“As we enter the development phase we are working closely with the Ugandan government to introduce a mutually beneficial partner with downstream expertise who is aligned with this long term approach,” said Tullow founder and chief executive Aidan Heavey.
Offloading a stake in the venture would allow Tullow to tap a larger partner for help in overcoming the area’s substantial obstacles to production and transportation – not least the fact that the fields lie 1,300km from the coast.
Tullow said it had secured the required banking facilities to exercise its pre-emption rights from a syndicate of its core relationship banks, ahead of the completion of a joint venture deal.
Under the terms of its agreement with Heritage, Tullow will pay an initial consideration of $1.35bn in cash, in addition to a contingent deferred payment of either $150m in cash or an interest in an oil field valued at a similar amount.
A spokesman for the firm said yesterday that Tullow is hopeful of gaining approval for the deal from the Ugandan government, given the substantial amount of money it has invested in the country in the past. In a shrewd political move, the company is also considering a secondary listing on the Ugandan stock exchange, indirectly offering citizens the chance to invest in their own oil reserves.
Eni has also put its own political machine into action, with a visit from Italian foreign minister Franco Frattini to the Ugandan capital of Kampala having taken place last week. The firm argues it has the right skills to develop the project, which requires the construction of crude processing facilities in Uganda and a heated pipeline to transport the waxy crude to the Kenyan coast for export.
The area around Lake Albert, on the border of Uganda and the Democratic Republic of Congo, is thought to contain over 2bn barrels of oil in three blocks. Heritage owns 50 per cent of blocks 1 and 3A, while Tullow owns a half interest in those blocks and 100 per cent of block 2.