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The Ugandan government will decide whether Tullow Oil PLC (TLW.LN) or Eni SpA (E) will be allowed to purchase Heritage Oil PLC's (HOIL.LN) two oil licenses in the country's Lake Albert basin, Heritage said in a statement Monday.

"The Government will determine which transaction to approve in its role as final arbiter," said the statement. "Heritage remains able to accept any superior proposal (unmatched by Tullow) made by any other party at any time prior to Heritage's shareholders' meeting on 25 January 2010," where the transaction will be approved.

Heritage agreed last month to sell its half-share in Ugandan oil blocks 1 and 3A to Eni for up to $1.5 billion, but Tullow Oil decided Sunday to exercise its contractual rights to pre-empt the sale and purchase the blocks itself.

Tullow and Heritage have discovered around a billion barrels of oil in the three blocks in the Lake Albert Basin. Tullow and Heritage have equal shares in block 1 and 3A and Tullow has 100% of block 2.

Uganda's government has been split over whether Tullow or Eni should buy Heritage's assets.

Some officials at Uganda's Energy Ministry and Minerals were strong supporters of Eni's entry into Uganda and have previously expressed concern that allowing Tullow to pre-empt would give it too much control of Uganda's oil industry.

However, other government officials gave their backing to Tullow, including the permanent secretary at the Ministry of Energy and Minerals who advised Uganda's President Yoweri Museveni against the Eni deal in a security briefing to the president seen by Dow Jones Newswires.

Tullow Chief Executive Aidan Heavey told Dow Jones Newswires Sunday that Tullow is acting with the full blessing of the government and he was confident it would approve the pre-emption.

Eni declined to comment.

Heritage said it expects to close the sale to either Tullow or Eni before the end of the first quarter.

"The successful monetization of the Company's Ugandan interest highlights the importance of our first mover advantage strategy as Heritage was the pioneering company in the Albert Basin," said Heritage Chief Executive Tony Buckingham.

   -By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com 
 

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