UPDATE:Uganda's Oil-Rich Kingdom Boosts Libyan Ties-Officials

Uganda's oil-rich Bunyoro kingdom is boosting ties with the Libyan government as the country prepares to start oil production in the next couple of years, kingdom officials said Wednesday.

They said the King of Bunyoro, Gafabusa Iguru, traveled at least four times to Libya since last year and attended the inauguration of Libyan leader Moammar Gadhafi as African Union chairman in Addis Ababa, the Ethiopian capital, last February.

"The relations between Bunyoro and Libya have been greatly entrenched since last year. Libya is already financing a number of projects in the kingdom including a big hospital and various schools," an Ugandan security official said.

The Libyan embassy in Ugandan couldn't comment immediately.

Ford Mirima, the spokesman of the Bunyoro kingdom told Dow Jones Newswires that it is in the interests of Bunyoro and Uganda as whole to forge cordial relations with Libya based on its expertise in the oil industry as the country prepares to start oil production.

"Our King as the head of cultural leaders in Uganda is a friend of Gadhafi and they have met several times," he said.

The kingdom is also in talks with the central government about the sharing of oil revenue once production starts. The kingdom wants the Ugandan parliament to include a clause detailing the sharing of revenue between the central government, local authorities and the kingdom in the new oil legislation, due to be tabled by the middle of this year.

Ugandan government sources say that Italy's Eni SpA (E) has been trying to win the consent of Bunyoro as it seeks to take over the interests of London-listed Heritage Oil PLC (HOIL.LN) in blocks I and 3A which are in the kingdom.

Company officials could not comment immediately.

Libya is in the process of increasing its stake in Eni to 10%, which will make it the second-largest shareholder in the company after the Italian government, which owns 20.3%.

As well as blocks 1 and 3A, where huge oil reserves have been discovered, Bunyoro has oil block 2.

However, attempts by Eni to acquire Heritage interests are being challenged by U.K.-based Tullow Oil PLC (TLW.LN), which has a 50% stake in the two blocks.

The company said in December it would use its preemptive rights to scupper a $1.5 billion deal.

Uganda is conducting feasibility studies on a 150,000 barrels-a-day refinery which are expected to be concluded in June this year. The government is also expected to license more exploration companies to explore for oil in the remaining five blocks later this year after a new oil legislation has been put in place.

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

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