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Tullow hangs on for Uganda oil approval

TULLOW Oil is edging closer to gaining full approval from the Ugandan government to snap up $1.5bn (£959m) worth of oil fields in the country, as it remains locked in discussions with two separate oil majors over the structure of a future partnership to develop the assets.

Tullow’s path to buying the fields from Heritage Oil is now cleared pending government approval, after Italian firm Eni last week renounced its rival offer. Heritage had originally agreed to sell the fields to Eni before Tullow decided to exercise a pre-emption right to buy them last month.

Tullow is now looking to seal a deal to sell off a 50 per cent stake in the Ugandan fields to a development partner, in order to appease government concerns over a lack of competition in the market.

Chinese state oil firm China National Offshore Oil Corporation (CNOOC) is the preferred bidder for the stake, though Tullow remains in talks about opening up the site to Total of France as a third partner.

Sources close to the discussions said that the terms are still being thrashed out and that any cash windfall from the deal for Tullow could vary widely depending on how development responsibilities and future royalties are split between the partners.

Developing the project is likely to throw up a number of logistical problems, not least the fact that the oil will have to be transported 1,300km to the nearest coast.

If the Ugandan government gives the green light to the deal, Tullow will take over full ownership of three blocks of oil fields in the area around Lake Albert, on the border of Uganda and the Democratic Republic of Congo. The area is thought to contain over 2bn barrels of oil.