National
Cabinet to veto Tullow oil deal move
In Summary
Daily Monitor has obtained a January 6 Cabinet minute in which the Executive agreed to recommend that the government vetoes the pre-emption right of Tullow.
Kampala
The Cabinet has indicated it will not approve the pre-emption rights of Tullow Oil Pty Limited, putting in serious doubt the company’s announcement on Sunday that it intended to buy Heritage’s participating oil interest in Uganda.
Daily Monitor has obtained a January 6 Cabinet minute in which the Executive agreed to recommend that the government vetoes the pre-emption right of Tullow.
The Cabinet, after a presentation by Energy Minister Eng. Hilary Onek, noted that due diligence had been done on both Eni International BV and Tullow and decided: “Eni should buy Heritage’s assets in the country and become the operator of Exploration Areas 1 and 3A and that Government should veto the pre-emption right of the Tullow based on the criteria spelt out in the Cabinet Memorandum.” Heritage Oil & Gas Limited entered into a Sales and Purchase Agreement with ENI in December to sell its 50 per cent interest Blocks 1 and 3A for a price of $1.5 billion.
It appears that the Cabinet based its decision on concerns that Tullow may be acquiring an excessive influence in Uganda’s oil fields.
The Cabinet expressed satisfaction that both Eni and Tullow had very strong qualities which warranted their presence in Uganda’s oil and gas industry, but warned in the minute that it would “not be strategic to keep only one company in the industry”.
Government Spokesperson Kabakumba Masiko told Daily Monitor: “The government has veto powers. We are not encouraging monopolies and we are encouraging competition.”
Onek silent
The Minister of Energy, Eng. Hilary Onek, would not comment on the revelations. Brian Glover, Business Unit Manager Uganda & East Africa, said he was not aware of the Cabinet discussions, and said that he would be meeting government officials this week.
But he denied that Tullow had any intention of creating a monopoly presence in Uganda, pointing to its farm out exercise which would see Tullow selling a stake in the blocks it owns, which include 100 per cent of Block 2 as well as its interest in Blocks 1 and 3A, to another company or companies.
“There is no monopoly scenario envisaged,” he told Daily Monitor, insisting that Tullow’s farm out activities, “enables greater choice for Uganda.”
The government has the right to approve or veto all transactions based on a range of criteria including Avoidance of a Monopoly Situation and Competition; Alignment with Government Development Strategy; Operator Experience; and Investment Required and Market Capitalisation of a Company. But it has not publicly confirmed the Cabinet position.
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Tullow plane to set up a refinery of only 5,000bpd while Eni wants 150,000bdp. Secondly, Tullow intends to focus on Ghana where the oil is easy to export, in crude form.Because Tullow wants to use most of its money in Ghana, it wants to begin with 4,000bpd yet Uganda alone consumes 13,000bpd. For those who are fooled by the listing of Tullow here, how many Ugandans have enough money to buy significant shares in a company with a market capital of 10 billion dollars?
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This plan if true, is suspect. Tullow cannot be a monopolist when it is active in less than 15% of the potential area. Secondly, Eni's credibility is in question (Sunday Vision story). Tullow Oil's plans to sell shares to Ugandans promises to transform Ugandans into real resource owners rather than "waiters" Whichever company government approves should have concrete plans to empower Ugandans and maximise benefits for government and Ugandans. Government's right to veto must benefit Ugandans and not Eni or any other private company.
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