CNOOC, Total Submit Uganda Oil Proposals - Sources

KAMPALA (Dow Jones), Mar. 5, 2010

France-based Total SA and China's Cnooc Ltd. this week presented their final development proposals for three Ugandan oil blocks to Uganda's government, and a government decision on the plans is expected before the end of March, people familiar with the process told Dow Jones Newswires Friday.

A government official said that Total was the first to make a presentation to the government on Tuesday this week, and this was followed by Cnooc on Wednesday. U.K.-based Tullow Oil PLC (TLW.LN) has nominated the two companies as potential partners for developing three Lake Albert oil blocks where more than 1 billion barrels of oil have been discovered.

Tullow is awaiting government approval to purchase a 50% stake in two blocks that are currently owned by U.K.-based Heritage Oil PLC (HOIL.LN). If successful, Tullow -- which already owns the remaining 50% stake in the two blocks, and all of a third, neighboring block -- would have full ownership of all three blocks, but has said it will bring in one or more partners to develop the assets.

A decision to allow Tullow to take over Heritage's interests in two Ugandan blocks is subject to the "agreeable" development proposals of Tullow's potential partners, according to Kalisa Kabagambe, the permanent secretary at the ministry of energy and minerals development. The Ugandan government has insisted that any deal must be in the interests of the country.

"The meetings between government and the companies are now over, but there are a lot of legal documents to be signed," the government official said Friday. Total could not comment immediately, while Tullow and Cnooc declined to comment. Cnooc Ltd. is the Hong Kong-listed unit of China National Offshore Oil Corp.

Tullow, Cnooc and Total are now expected to sign sales and purchase agreements, as well as a cooperation agreement, with each other. The agreements will then be forwarded to the Ministry of Energy and Minerals Development, as well as the attorney general, before a final approval, the official added.

Last month, the Ugandan government invited Cnooc and Total to make individual presentations on their development proposals.

Kabagambe last month told lawmakers sitting on Uganda's Natural Resources Committee that the approval for the partners to join the licenses shall be made only upon confirmation that the partnership addresses the country's interests. Government wants the three oil companies to operate one block each in order to avoid a monopoly. According to government, at least $8 billion is required for the development of the country's oil sector in the next 10 years.

Cnooc and Total have both expressed interest in building a refinery in Uganda, and an export pipeline to the East African coast.

Copyright (c) 2010 Dow Jones & Company, Inc.


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