Tullow Oil has entered into a sale and purchase agreement with Heritage Oil to purchase the company's interest in oilfields in Uganda.
Jersey-based explorer Heritage Oil agreed to sell its half-share in Blocks 1 and 3A on the Ugandan side of Lake Albert to Italy's Eni for up to $1.5 billion in December. But Tullow, which owns the rest of the two oil blocks, exercised a pre-emption right last week.
The process is subject to government approval, and Tullow said it was hoped to complete the purchase in the first quarter of the year.
Tullow is also discussing preferred partners with the government, it said.
Uganda earlier said the battle between Tullow Oil and Eni for the oilfields was still open, despite endorsement for Eni from a government minister last week.
President Yoweri Museveni said in a statement late yesterday that he was mulling proposals from both sides, including a plan by Tullow to bring in China's CNOOC as a partner.
On Thursday, energy minister Hillary Onek criticised Tullow for not living up to its "contractual obligations" and said the government supported the Eni bid. But this view now appears not to be shared in all corners of government.
"President Museveni said that the government will discuss all proposals by companies operating in the oil and gas sector adding that the country looks forward to welcoming new companies," his office said. "The government of Uganda will reach a decision in the coming weeks on the current process of pre-emption that will respect the contractual rights of the existing companies."
A source familiar with the matter said Tullow has selected China's CNOOC, although France's Total was also on the final shortlist of potential candidates that was forwarded to the government for approval.
CNOOC officials met Museveni yesterday, and "expressed interest in joining Uganda's oil and gas sector by partnering up with Tullow", the statement from Museveni's office said.
The source said officials from Total would also meet the government this week but added: "CNOOC are the first choice".
Eni said it would cost around $13 billion to bring the Ugandan fields onstream as fullscale production would require the construction of a pipeline to the Kenyan coast, a power plant and other infrastructure.
Shareholders in Heritage overwhelmingly backed the sale of the assets to either Eni or Tullow Oil, at an extraordinary general meeting yesterday, Heritage said today.
The company plans to redeploy the cash exploring for oil in the Kurdish area of Iraq.
Heritage shares traded down 1.4 per cent at 10.45am today compared with a 1 per cent drop in the DJ Stoxx European oil and gas sector index. Tullow traded down 2.6 per cent, while Eni was down 0.5 per cent.
Reuters