Italy's foreign minister said Friday Eni Spa (E) would pump billions of dollars into the Ugandan oil sector as he made the case for the Italian company to take a stake in Uganda's two oil blocks in the Lake Albert basin.

"We have always stood by Uganda, even at a time when other countries abandoned it in its recent history," Franco Frattini told reporters in the Ugandan capital Kampala. He said more Italian companies are looking at investing in the country's agriculture and health sectors.

Frattini said Eni plans to build an oil refinery in Uganda and install a power plant to ease the country's power shortage.

Earlier, Frattini held talks with Ugandan President Yoweri Museveni in which they discussed the pledges made by Eni, among other issues.

Sam Kutesa, Uganda's foreign affairs minister, said separately that the president would study Eni's proposals and respond in due course.

"As government, we shall consider everything on the table and make our response," he said.

Eni is seeking to take over a 50% stake in two oil blocks on the Ugandan side of the Lake Albert basin. The stake is currently owned by London-listed Heritage Oil PLC (HOIL.LN), but the $1.5 billion deal is facing possible preemption from U.K.-based Tullow Oil PLC (TLW.LN), joint owners of the blocks.

People close to the situation say Tullow is in the process of pre-empting the deal this week. Government sources say the Ugandan cabinet remains divided over the deal.

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