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Tullow Nears Uganda Deal With CNOOC, TOTAL

Source: Reuters 3/10/2010, Location: Africa

Tullow Oil Plc said it had agreed a framework deal with China's CNOOC and French oil major Total that would see the companies become equal partners in three Ugandan oil blocks.

Tullow added that it had upgraded its estimate of reserves at its Tweneboa field in Ghana by 60 percent and said on Wednesday the field could prove to be much bigger yet, while total resources in its Ghana interests could be as much as 4.5 billion barrels.

Tullow previously said it was talking to CNOOC and Total about partnering in Uganda, where Tullow owns half of two blocks and 100 percent of a third, on the shore of Lake Albert.

Tullow has also exercised a pre-emption right to buy the half-shares in two of the blocks owned by Heritage Oil in the two half-owned blocks, a move which should give it full ownership of all three blocks.

Combined, all three blocks are worth around $5 billion, Peter Hitchens, oil analyst at Panmure, said.

Energy Ministry's permanent secretary, Kabagambe Kaliisa, told a news conference on Wednesday that Uganda will decide on whether to allow the pre-emption by April.

Tullow had previously planned to retain a half-interest in each of the three blocks but believes giving up more of the blocks is a price worth paying to secure the involvement of both Total and CNOOC.

"We believe this unified structure, if delivered, will be beneficial in exploiting the discovered resource base," Phil Corbett, oil analyst at Royal Bank of Scotland, said.

A level below 33 percent may have been too small to attract the interest of such large international players, oil executives said.

Nonetheless, Tullow shares fell 0.6 percent to 1,273 pence at 1554 GMT against a 0.8 percent rise in the STOXX Europe 600 Oil and Gas index.

The stock has doubled in value through the past year on the back of big finds in Ghana and Uganda.

The company upped its "proved plus probably" reserves estimates -- the most likely estimate of recoverable reserves -- for its Tweneboa field to 400 million barrels from 250 million.

"This should provide a significant boost to our net asset value (for the company)," Hitchens said.

Exploration director Angus McCoss told Reuters in a telephone interview the field could be as big as the nearby Jubilee field which has proved plus probable reserves of 1.2 billion barrels.

The company added that Jubilee remained on budget and was on track for startup in the fourth quarter of 2010. Tullow said its net profit fell a lower-than-expected 92 percent to 19 million pounds ($28.5 million) in 2009 due to lower oil and gas prices and output. Analysts had forecast a wide range of results from a loss of 21 million pounds to a profit of 11 million.

As Tullow's assets are mainly undeveloped oil fields and exploration acreage, investors focus on new oil finds and reserves upgrades rather than day-to-day profitability.

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