CNOOC to buy stake in Tullow Oil's Ugandan assets for $2.5B

According to a report from Dow Jones, Chinese oil and gas producer CNOOC has agreed to purchase an interest in Tullow Oil’s Ugandan assets for $2.5 billion.

Tullow holds interest in three licenses in the Lake Albert Rift Basin of Uganda: Blocks 1, 2 and 3A. Exploration starting in 2005 has proven successful, discovering oil over a 150 kilometer range. Furthermore, drilling in 2008 and 2009 confirmed that Blocks 1 and 2 contain an upside potential of more than 1 billion barrels of oil.

Exploratory drilling on Block 3A has also discovered oil.

With many more exploratory wells slated to be drilled, Tullow’s oil assets in the Lake Albert Rift Basin of Uganda are estimated to contain another 1.5 billion barrels of undiscovered oil

Not yet signed, the agreement between Tullow and CNOOC further solidifies China’s presence in East Africa’s oil and gas industry. Currently, CNOOC is exploring for oil in Kenya, and CNPC and China Petrochemical Corp. hold interests in oil production projects in Sudan.

The agreement awaits the approval of the Ugandan government, but Tullow revealed last month that either French Total or CNOOC would partner to develop the massive Ugandan reserves. Additionally, the company’s chief executive Aidan Heavey said that a new partner would pay for the development of the export pipeline needed to transport the oil to the port of Mombasa, Kenya.

A refinery will most likely be included in the development of the Ugandan assets, as well.

Earlier this week, the Ugandan government approved Tullow’s purchase of Heritage Oil’s stakes in two of the Ugandan oil blocks for $1.35 billion. In December, UK-based Heritage agreed to sell its 50 percent stakes in Blocks 1 and 3A to Italian Eni, but Heritage exercised its right to buy the interest at the same price.

With the approval of this acquisition, Tullow wholly owns the three Ugandan blocks. It is unclear how much interest CNOOC is looking to acquire in the blocks.

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