Tullow hopes Uganda can help get back Congo oil blocks

Fri Dec 3, 2010 1:57pm GMT

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* Tullow wants Total, CNOOC role for Congo Blocks 1, 2

*Rivals propose a $2.5 billion oil pipeline to Kenya

By Katrina Manson

KINSHASA, Dec 3 (Reuters) - Britain's Tullow Oil (TLW.L) has enlisted Uganda's help to win back two disputed Congo oil blocks it wants to develop with France's Total (TOTF.PA) and China's CNOOC, according to a letter obtained by Reuters.

The Nov. 19 letter from Tullow Chief Executive Aidan Heavey, whose company is battling licence woes in both Congo and neighbouring Uganda, says it sought the advice of Uganda's energy minister and is now confident it can get the blocks back.

The disputed Congo blocks, scheduled to be explored by other companies early in 2011, are on the Congo side of Lake Albert and Tullow has said it wants to join them up with blocks it already holds on the Ugandan side where it has agreed to partner with Total and CNOOC (0883.HK).

"Now we are confident that with the assistance of (Uganda Energy Minister) Hon. Eng. Hilary Onek, this matter can at last be put to rest," said the letter, adding Tullow is ready to consider dropping its legal challenges over the blocks.

"Tullow believes that it and its new partners in Uganda, Total and CNOOC, can play a very strong role in the exploration and exploitation of the whole of the Albertine Region."

Tullow sought legal action after Blocks 1 and 2 of Congo's eastern Albertine Graben were awarded by presidential decree in June to previously unheard of Caribbean-registered firms Caprikat Ltd and Foxwhelp Ltd.

Tullow paid $500,000 for rights to the blocks in 2006, but the deal was never ratified by the presidency.

"It's normal for them to fight but now they are trying to be more friendly," Congo Energy Minister Celestin Mbuyu told Reuters, without saying if he would meet the company for negotiations. A Tullow spokesman declined to comment.

Despite Tullow's attempts to block development of the concessions during international arbitration, exploration of the blocks is set to begin next month. [ID:nLDE6AO1RZ]

Giuseppe Ciccarelli, CEO and general manager of Oil of Congo, a Congolese-registered company that will operate the blocks and in which Caprikat and Foxwhelp will have 85 percent, told Reuters exploration would start in January.

"I think that the bad time is over ... Now we go at full steam," he told Reuters in an interview.

He said the first phase of exploration would start with seismic and aerial surveys from Jan. 10 and would cost $10-15 million, and that the company would meet unnamed companies as potential investor partners next week.

The offshore companies, whose shareholders via a Swiss-administered fund have not been revealed, are also advising the Congo government on plans for a $2.5 billion oil pipeline running from Lake Albert to Kenya's Mombasa port.

Minutes of a meeting held on Oct. 19 in Kampala, signed by energy ministers from Congo, Uganda and Kenya and seen by Reuters, show that Oil of Congo advocated the development of an "inter-governmental company" to own the proposed pipeline.

"The peak production timing of the potential from the Albertine Graben is predicted to be 2016 and by this time, the pipeline infrastructure could be in place," said the minutes. (Editing by Richard Valdmanis and Jon Loades-Carter)