Nairobi — Speculation over who will be developing Uganda's potentially massive oilfields reached fever pitch last week after it became clear that Tullow Oil have just a few weeks to decide whether to pre-empt the sale of Heritage Oil's Ugandan assets to Eni, the Italian energy group.

The Eni bid which has Ugandan government support, will see it take over the 50 per cent stake Heritage holds in two blocks along Lake Albert. Tullow which is Heritage's partner owns the other 50 per cent.

The government is said to favour the Eni deal as it hopes such a major energy company will speed up the process of oil production.

Paolo Scaroni, Eni's chief executive said last week: "Heritage should consider other offers but the government of the country where the assets are must agree on the sale."

Tullow and Heritage have come to a point where they need to sell part of their stakes in order to develop the oil fields.

Uganda is thought to hold as many as 2.4billion barrels of oil and the government has said publicly that it wants to refine the oil drilled at home.

Government opposition may influence Tullow's decision but Brian Glover, the company's Uganda manager said they see Uganda "as one of our key countries for future investment."

Tullow, which also owns block 2 has said there are around 1.5 billion barrels of untapped reserves around Lake Albert and it aims to produce between 5,000 and 10,000 barrels a day by 2012.

"If Tullow were to pre-empt, this would give the company 100 per cent of Blocks 1, 2 and 3a which presumably it would then sell to a partner with the balance sheet and expertise to expedite the development," Royal Bank of Scotland said in a note, adding that Tullow would most likely finance the transaction with a loan from a bigger oil company it would then sell the assets to.

A report in the Financial Times said it was unclear whether Uganda would allow Tullow to pre-empt the sale.

"Several analysts and oil company executives have suggested that the fraction of block 2 that Tullow was willing to sell is not worthwhile for big international oil companies, such as Chevron of the US or the UK's BP, to enter Uganda," the report said.

"Big companies are keen to add new developments to their portfolios. Small additions are often not enough to warrant the investment, especially if it includes complex and costly infrastructure developments, such as refineries and inter-state pipelines.

"It is these challenges that have prompted Tullow to sell and why Uganda wants a big oil company, such as Eni, as part of the project."