March 8, 2011 / 5:05 PM / 9 years ago

BG quashes Iraq asset buy rumour

LONDON (Reuters) - British gas firm BG Group BG.L said buying assets in Iraq does not form part of its current plans, quashing talk that the company was mulling a bid for Heritage Oil HOIL.L’s assets there.

Shares in Heritage climbed as much as 11 percent earlier on Tuesday, with traders citing market rumours that BG may be looking at Heritage’s Iraqi assets.

“We do not comment on market rumours or speculation but Iraq does not form part of BG’s current plans,” a BG spokesman told Reuters.

The shares pared earlier gains to trade up 4.3 percent at 286 pence at 3:11 p.m.

Analysts said reports that a tax dispute in Uganda involving Heritage and former partner Tullow Oil (TLW.L) was near resolution also boosted Heritage’s shares.

A source in Uganda’s energy ministry told Reuters on Monday that Tullow has responded positively to its latest attempt to resolve the dispute, with an announcement expected in the coming days.

Tullow is announcing its full year results on Wednesday.

Heritage paid the Ugandan government a portion of the disputed tax Kampala says it is owed from Heritage’s sale of oil assets to Tullow and has deposited the remaining cash in an escrow account in London pending arbitration.


Heritage said in January it had made a major gas discovery — which analysts estimate to be the sixth-largest gas field ever discovered in Iraq — in the country’s semi-autonomous Kurdistan region.

The discovery of gas disappointed investors who were hoping Heritage would find oil, which is easier to monetise, and the company’s shares have since languished, down 37 percent since news of the gas find.

Analysts have speculated that Heritage would be a willing seller of the Iraq assets, looking to replicate the strategy it employed in Uganda of divesting the assets before the development stages.

Oriel Securities analysts said past deals showed there were potential buyers of gas assets in Kurdistan, such as Austrian energy group OMV (OMVV.VI).

Reporting by Sarah Young; Editing by Rosalba O'Brien

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