UPDATE: Tullow Oil Expects Govt Approval For Uganda Deal Tuesday

6th Jul 2010 08:59

(Adds analyst comment.) By James Herron Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Tullow Oil PLC (TLW.LN) believes it will receive notification from the Ugandan government Tuesday that it has approval to purchase the Lake Albert oil licenses of Heritage Oil Ltd. (HOIL.LN) and sell on a portion of them to Total SA (TOT) and China National Offshore Oil Company (CEO), the company's Chief Financial Officer Ian Springett said. Tullow representatives will meet with the Ugandan government later Tuesday, and the precise details of the government's position can't be known until then, Springett said. The much-delayed deal has been awaiting approval for months due to a disagreement between Heritage and the Ugandan government over how much capital gains tax the company should pay on the proceeds of the sale, which will be up to $1.5 billion. Its completion is crucial to the development of more than a billion barrels of oil discovered in Uganda's Lake Albert region. Despite the delay, Tullow still expects to produce first oil from the Lake Albert region, for consumption on the local market, by the end of 2011. By 2014 or 2015, Tullow expects to be producing more than 200,000 barrels a day of oil from the region, a portion of which will be exported to international markets. "Behind the scenes we have been working closely with Cnooc and Total to move things forward," Springett said. Tullow will disclose how the development of the project, which will require a 1,200 kilometer export pipline and refinery, will be divided up between the partners. Tullow will focus on upstream operations around Lake Albert, he said. Tullow agreed in January to purchase Heritage's half-share in two oil licenses for up to $1.5 billion, pre-empting a previous sale agreement with Italy's Eni SpA (E). The Heritage deal would briefly give Tullow 100% of the three Lake Albert licenses, but it has agreed to quickly sell on a third of these licenses to both Total and Cnooc. Tullow's drilling activities will increase in the second half of the year, said exploration director Angus McCoss. "We've got a program of high-impact wells, 15 of them in Ghana and Uganda," he said. September and October will be the most exciting period for Tullow this year, said Panmure Gordon analyst Peter Hitchens. "They will start to drill some big exploration wells around the coast" of West Africa, he said. The Owo-1 well currently drilling offshore Ghana is the most interesting prospect and will "make or break" Tullow's 1.4 billion barrels of oil equivalent reserve upside estimate for the Tweneboa field, said NCB Stockbrokers analyst Peter Hutton. At 0744 GMT Tullow shares were up 3.4%, or 35 pence, at 1,076 pence. Heritage shares were up 4.4%, or 17 pence, at 395 pence. -By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; [email protected] (END) Dow Jones Newswires July 06, 2010 03:59 ET (07:59 GMT)