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The Ugandan government has backed the proposed takeover of interests of Heritage Oil PLC (HOIL.LN) in the country by Italian oil company Eni SpA (E), the junior minister of Energy and Minerals said ahead of a parliamentary debate Wednesday on the issue.

In a ministerial statement, Peter Lokeris said Uganda needs larger companies to help it exploit its oil reserves.

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

Eni "is active in 70 countries around the world, including Angola, Ghana, Congo, Gabon and Mozambique," Lokeris said.

The ministerial statement will be debated Wednesday ahead of its expected approval by government.

The statement said that 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.

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

According to sources, the Ugandan government is largely in favor of Eni taking over Heritage assets and will not allow Tullow oil to scupper the deal.

The government is expected to give Eni favorable capital gains tax to enable it take over Heritage's interest and will not do the same if it's Tullow Oil.

Lokeris told Dow Jones Newswires he would consult with other relevant government ministries on whether he can present deals with oil exploration companies to the national assembly Wednesday.

"Parliament wants government to reveal the oil production agreements with private companies, I am still consulting on the issue," he said.

The national assembly wants the copies of the deals signed between the government and the oil companies Heritage, Tullow, Tower Resources Ltd.(TRP.LN) and Dominium Ltd. since 2006.

The government has in the past refused to reveal the deals citing confidentiality clauses.

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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