Tullow Oil plc has announced that its subsidiary, Tullow Uganda Limited has finalized the acquisition of Heritage Oil and Gas interests in Uganda.

Oil drilling in western Uganda

Tullow oil said in a statement Tuesday that they have completed the US$1.35 billion (about 2.8trillion Uganda shillings) acquisition of a 50% interest in Blocks 1 and 3A in Uganda from Heritage Oil & Gas Limited (“HOGL”) with an additional contractual settlement amount of US$100 million.

Block 1 and 3A of the Lake Albert Rift Basin area in western Uganda is the area where most of the oil wells confirmed in Uganda are located. Tullow oil Uganda and Heritage oil held a 50-50% stake in the two blocks.

The government of Uganda which has been hesitant to approve the deal over concerns of establishing a monopoly by Tullow, as well as taxation of the deal, on July 6^th finally accepted the deal to go ahead.

But Heritage Oil and Gas said in a statement on Tuesday it has been forced to deposit approximately US$405 million in part deposited with the Government of the Republic of Uganda (“Government”) and in part held in escrow pending resolution of a tax dispute with the Ugandan Revenue Authority (the “URA”), meaning the company received  US$1.045 of the total cash Tullow Oil paid for heritage assets in Uganda.

Tullow says all the conditions for the purchase have been met and the assets of Heritage Oil and Gas have been transferred to Tullow Uganda.

“This is a major step forward for Tullow and the Ugandan oil industry. We now look forward to signing the farmdown agreements with CNOOC (China National Offshore Oil Corporation)and Total in the coming weeks and commence work with them on an accelerated basin-wide development plan that is expected to deliver production well in excess of 200,000 bopd from the Albert Rift Basin,” Aidan Heavey, Tullow Chief Executive said today.

In order to allay the government of Uganda’s fears of a monopoly, Tullow promised it will sell part of its stock to CNOOC and Total.

Tullow says they are now planning to enter into transactions with CNOOC and Total to farm down two thirds of its interests in Blocks 1, 2 and 3A in the Lake Albert Rift Basin.

“This will result in a unified partnership to accelerate development of the basin and turn Uganda into a significant oil producing nation,” Tullow says.

“Heritage has experienced incredible operational success in Uganda as a result of technical excellence and first mover advantage. We are delighted to have played the key role in developing this new major industry for Uganda. The success of our exploration programmes has generated significant value for the people of Uganda and our shareholders. As an exploration company we felt it more appropriate to exit now and leave the development of the Ugandan oil industry to other companies with the relevant downstream expertise. We will continue to co-operate with the Ugandan Government and look forward to resolving the Ugandan tax matter as soon as possible,” Tony Buckingham, Heritage Oil and Gas Chief Executive Officer said.

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By Ultimate Media