The Ugandan government has backed the proposed takeover of interests of Heritage Oil PLC (HOIL.LN) in the country by Italy-based Eni Spa (E), saying the country needs larger companies to help it exploit its oil reserves, the junior minister of Energy and Minerals has said.

In a ministerial statement, Peter Lokeris said Heritage Oil and U.K.-based Tullow Oil PLC (TLW.LN) are considered small to medium sized and informed the government earlier this year of their intentions to bring on board larger companies as the oil development plan enters into a capital-intensive phase.

"Eni is the sixth largest oil company in the world. It is active in 70 countries around the world, including Angola, Ghana, Congo, Gabon and Mozambique," He said.

According to Lokeris, because of Eni's expertise in oil production and refining, the government fully supports its plans to take over Heritage's interests in two blocks in a $1.5 billion deal.

But Tullow Oil, which jointly owns the two blocks with Heritage, has indicated that it would exercise its preemptive rights to scupper the deal.

Uganda is expected to start oil production in the next three years on its side of the Albertine Basin and is carrying out a feasibility study on the establishment of a 150,000 barrel-a-day refinery. The study is expected to be completed in April next year.

Around 2 billion barrels of oil have been confirmed in Uganda, with only 30% of the oil region explored so far, according to the government.

-By Nicholas Bariyo, contributing to Dow Jones Newswires; +256 75-262 4615; bariyonic@yahoo.co.uk
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