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Eni to invest Shs25 trillion in Uganda

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By Walter Wafula

Posted  Tuesday, January 26   2010 at  00:00

In Summary

ENI and Heritage signed a contract in November last year, under which ENI will acquire Heritage's half ownership of Block 1 and 3a for $1.5 billion in cash and assets. British firm Tullow Oil Plc which has almost lost the battle to own the oil fields owns the other half of the lucrative oil blocks.

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Kampala

Italian oil group ENI Spa plans to invest at least Shs25 trillion in a refinery and electricity power plant in Uganda, should it acquire ownership of Heritage Oil’s stake in two oil blocks in Uganda.

“The Italian group will also rehabilitate a colonial-era rail line between the Ugandan capital Kampala and the Kenyan port of Mombasa and build a new pipeline to Tanzania's commercial capital Dar es salaam,” reported La Reppublica, an Italian newspaper on Monday, quoting the ENI chief Executive Paolo Scaroni.

The oil firm wants to spend $13 billion on the activities should it get the green lights to takeover Heritage Oil’s interests. Filippo Cotalini Eni’s publicist, confirmed the investment plan to Daily Monitor in an interview on Monday.

ENI and Heritage signed a contract in November last year, under which ENI will acquire Heritage's half ownership of Block 1 and 3a for $1.5 billion in cash and assets. British firm Tullow Oil Plc which has almost lost the battle to own the oil fields owns the other half of the lucrative oil blocks.

The government, through cabinet is expected to overrule a bid by Tullow to have total ownership of the blocks in order to have more players in Uganda’s oil industry, Energy Minister Hillary Onek said last week.

In a related development, it has also emerged that ENI is likely to offer the government between Shs.391 billion ($200 million) and Shs.586 billion ($300m), to secure ownership of Heritage’s interests in Block 1 and 3a, according to the Sunday Times in the United Kingdom.

It added that some of the cash will go to Heritage’s investors but most of it is expected to go to the Ugandan government. But Mr Cotalini refused to comment on the subject calling saying it is “speculation.”

Commenting on Eni’s intention, Dr. Maggie Kigozi, the Executive Director of Uganda Investments Authority said; “It is a good thing that ENI has the capacity to build a refinery but there are many other companies that are interested in building the refinery.” It will have to compete with other companies when we invite them to bid, to ensure that there’s transparency,” she said.

Ten companies including; China National Offshore Oil Corporation, Total, Exxon-Mobil, are said to be interested in constructing an oil refinery in Uganda

Executives of China National Offshore on Monday met with President Yoweri Museveni and showed off their capacity to invest in oil related infrastructure, production and exploration, according to Aston Kajara, the state minister for investments. “They want to partner with Tullow to build an oil refinery. It is one of the companies that they (Tullow) want to work with,” Mr Kajara said in a phone interview.