UPDATE: Tullow Favors Exxon Mobil,Total For Uganda Oil Stakes

U.K.-based Tullow Oil PLC (TLW.LN) favors selling part of its Ugandan oil interests to U.S. oil company Exxon Mobil Corp. (XOM) or France's Total SA (TOT) to participate in their development, according to people familiar with the sale process.

Tullow Oil previously said it had opened its data room in October to companies interested in buying minority stakes in its Ugandan discoveries.

At least 10 international companies expressed interest in the blocks located in the Lake Albert area. People familiar with the matter have now confirmed that Tullow prefers Total and Exxon Mobil, which were among those invited to its data room.

The international oil companies' interest highlights the industry's strengthening appetite for access to Africa's emerging oil nations. Tullow prefers to team up with Exxon Mobil or Total because both are experienced in developing pipelines and refining projects, and both have strong financial capacity, one of the people said. Ugandan President Yoweri Museveni hosted a November meeting in the country with Exxon Mobil executives to discuss the possible acquisition of a stake in Tullow's acreage, according to a Ugandan security ministry memorandum seen by Dow Jones Newswires.

The Ugandan government is expected to make a decision on the Tullow stake sale early this year. Total declined to comment Monday about the proposed sale of a stake in Tullow's Uganda acreage.

Exxon Mobil's press office for exploration and production declined to comment Monday.

But it said, "Exxon Mobil routinely evaluates potential opportunities around the world."

Tullow Oil Uganda Ltd. and a spokesman for Tullow in London declined to comment.

The security ministry's memo also warned the government against approving a related deal - the proposed takeover of Heritage Oil PLC's (HOIL.LN) Ugandan interests by Italy-based Eni SpA (E). The document said that such a deal could hurt the country's economy. Heritage and Tullow Oil are joint owners of blocks 1 and 3A, which means Tullow's new partner may have to work with Eni.

Tullow had hoped to secure bids from potential stake buyers by the end of 2009, according to the security ministry's memo, which was submitted to President Museveni in December. However, Heritage's decision to sign a letter of intent with Eni for the sale of its Ugandan interests has complicated Tullow Oil's plans.

According to the memo, a joint operating agreement between Heritage and Tullow, signed on Aug. 22, 2002, doesn't allow Heritage to sell its stake without Tullow Oil's consent.

Tullow Oil is the sole owner of block 2 on the Ugandan side of the Albertine rift.

"Tullow Oil officials say that they will resist the [Heritage assets] deal at all costs," the memo said.

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

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