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8 Cos on Tullow's List to Join Uganda Oil Project

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Lake Albert, Uganda, Republic of Congo
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Uganda Blocks
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LONDON (Dow Jones Newswires), Aug. 21, 2009

Tullow Oil has compiled a shortlist of eight prospective partners to join its development of oil resources discovered in the Lake Albert region of Uganda, a person familiar with the matter told Dow Jones Newswires Friday.

Italian oil company Eni SpA, which was in Uganda last week for talks with the government, is on the list, the person said. Major Chinese, Indian and Western oil companies are also on the list, the person added.

Tullow is preparing to send a letter of invitation to the shortlisted companies, marking the "first formal step" in the process to select a partner for the oil development.

Tullow is seeking a partner that could build and operate a 1,200 kilometer export pipeline to take Ugandan crude to the Kenyan port of Mombasa and a refinery to process some oil for the local market -- a key desire of the Ugandan government. Tullow would prefer to limit its operational involvement to drilling and developing the fields themselves, the person said.

"Tullow needs a big player there," with the right experience and who is able to contribute to the large capital cost of the development, the person said. Tullow would like to have a potential partner at the table for serious discussions by the end of the year, the person said.

Tullow declined to comment.

A senior official at Uganda's Petroleum Exploration and Production Department told Dow Jones Newswires last week the process to bring Eni into the Ugandan development is "almost a done deal" and a cooperation deal could be signed soon.

The person said no single company has yet been given preference over others on the shortlist and the process is still at an early stage.

The Ugandan official also told Dow Jones Newswires that Tullow and its prospective partner would be expected to do a feasibility study for the construction of a 100,000 barrel a day refinery in Uganda.

The Ugandan government has previously said no unrefined oil should be exported from the country, despite local oil demand being far short of the 150,000 barrels a day that Lake Albert may eventually be able to produce.

This potentially puts the government in opposition with the export plans of Tullow and its partner in some of the discoveries, Heritage Oil Ltd. Despite the public rhetoric, "there is a friendly and constructive discussion going on between Tullow and the energy ministry," and realistic expectations over what size of refinery is appropriate for the country, the person said.

Copyright (c) 2009 Dow Jones & Company, Inc.

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