Heritage Oil and Gas Company is apparently offering its business stakes in Uganda to Italian energy giant Eni S.P.A because it lacks sufficient financing to construct oil infrastructure such as refineries and pipeline, according to a top official.

"We have decided to enter into this letter of intent with Eni as we recognise the very large multi-billion dollar investment which is required to develop the Albert Basin and the related infrastructure," Mr Tony Buckingham, Heritage's chief executive officer, was quoted as saying in a statement issued yesterday to confirm the proposed takeover.

In a November 17 interim management statement, the Canadian firm, announced that as at September 30, it had $222 million (Shs415 billion) available to bankroll planned activities in 2010.

Heritage is giving up six oil wells it operated in Blocks 1 and 3A (Kingfisher fields) in Albertine region in a proposed deal with the Italian multinational company worth $1.5 billion (Shs2.8 trillion).

The parties expect to reach a final agreement in 60 days. The deal, however, will require the approval of shareholders sometime next month and the government has to endorse it - that's if it will - before commencement.

Yesterday's press release showed that the company that estimates its oil find here to be in the region of 300 million barrels will now invest its fortunes to reinforce oil producing business in Russia and explorations in five other countries, the neighboruing DR Congo inclusive.

Mr Buckingham said Heritage, one of the 250 top companies listed on the London Stock Exchange, had "remarkable operational success in Uganda as a result of technical excellence and first mover advantage."

Energy Minister Hillary Onek declined to speak on the nearly-settled transaction that he said he learnt about only from the media.

The Ministry Permanent Secretary Kabagambe-Kaliisa was reported out of the country when we tried to contact him yesterday.

However, a senior technocrat who asked not to be named in order to speak freely on the highly secretive contracts, said the oil deposits in the Kingfisher field belong to the government, suggesting Heritage could have "sold high hopes of huge find."

When we tried to reach Mr Buckingham by phone yesterday to clarify the arising issues, a staff in his London office referred us to Mr Nick Lambert of Bell Pottinger Corporate & Financial PR (Europe) who had not replied our e-mail enquiry by press time.

In Kampala, Mr Keith Muhakanizi, the deputy Secretary to the Treasury, in an interview last night could not say if Uganda would tax the $1.5 billion due to Heritage.

"I just saw the proposed takeover in the newspapers. I am not conversant with the agreement between the government and Heritage Company," he said, referring this reporter back to Mr Kaliisa.

Analysts say an initial $1.5 billion (Shs2.8 trillion) offer by Eni could push its expenses, together with expected production investment overboard.

It is feared these premiums when factored into the final pricing could potentially make Uganda's oil comparably too expensive - perhaps highly price than imported gasoline or diesel.

Disclaimer

In a disclaimer, Heritage, which announced immediate termination of its $15 billion merger talks with Turkey's Genel firm, said it would not be liable for any future inaccuracies or uncertainties, resulting from current estimates on available oil reserve and recoveries.