Last weekend, Uganda announced its decision to partner with Tanzania to construct its crude oil pipeline from Hoima to the port of Tanga, leaving Kenya in the cold. Kenya has said it will continue with its plan to construct its own pipeline.
Finally, Uganda has made a decision to partner with Tanzania in its crude oil pipeline construction from Hoima to the Indian Ocean for trade.
This came as a blow for Kenya as it had expected to partner with Uganda to construct a pipeline which would enable the country to transport its recently discovered crude oil to the sea.
Tanzania won the deal that will see it partner with the landlocked Uganda to construct the 1,400-kilometer pipeline to Tanzanian port of Tanga, according to a communique from African officials last weekend.
Uganda’s decision was announced during the 13th Northern Corridor Integration Projects (NCIP) summit in Kampala, which was attended by Presidents Paul Kagame (Rwanda) Uhuru Kenyatta, (Kenya) Yoweri Museveni (Uganda) and Salva Kiir of South Sudan.
During the regional summit of leaders held on 24th April, Uganda’s foreign minister Sam Kutesa said that his country agreed to pursue the Tanzania route due to cost. The Tanzanian route is estimated to cost $4 billion, which is about $1 billion less than the Kenyan alternative. Officials expect its completion by mid-2020 when President John Magufuli’s first term will be coming to an end.
In addition to cost, Total, Uganda’s main oil investor, influenced Museveni’s decision by using its financial standing to obtain its interests of having all its resources in Tanzania.
Throughout the talks, Total argued that the Kenyan route was a risk for Uganda’s oil business pointing out that the impoverished northern Kenya, which is close to Somalia would expose the pipeline to attacks by al Shabaab.
On the other hand, Tullow Oil Plc, which has oil discoveries in Uganda and Kenya, preferred the route via northern Kenya estimated by the Nagoya, Japan-based Toyota Tsusho Corp. to cost about $5 billion.
Unlike Kenya, Tanzania waived land fees, taxes on the pipelines, and transit charges in order to make its deal even more attractive. Kenya, on the other hand, was to charge Uganda Sh1,280 per barrel of oil transported through the Hoima-Lokichar-Lamu route.
Now that Total has convinced Uganda about the Tanzanian route, Kenya says it will still go on with its plans to construct a pipeline through the northern corridor to Lamu as part of its Vision 2030 national development program.
It is estimated that the Lamu corridor transport and infrastructure project, known as Lapsset, will amount to around $20 billion. The project will include new roads, railway lines, airports, cities, and pipelines and would have connected Uganda’s oil fields and South Sudan’s to a new Lamu refinery and port.
Even with the new development, Kenya indicated on Saturday that it will continue with Lapsset and build a pipeline for its own crude.
According to Petroleum Principal Secretary Andrew Kamau, Kenya will now go ahead with its plans to conduct the Front End Engineering Design (FEED) that will give finer details on the route and timelines to construct the pipeline.
In a statement, Tullow, Kenya’s major oil explorer said it was pleased that the decision on the pipeline route had been reached.
“The decision around a regional crude oil pipeline was a government-to-government decision, and we are pleased that a decision has been made.”
“While we have always believed that a joint Uganda-Kenya export pipeline was the most cost-effective option, we are clear that both Uganda and Kenya’s oil resources can be developed separately,” said Tullow Country Manager, Martin Mbogo, was quoted by Daily Nation.
“We will now work with both the Government of Uganda and the Government of Kenya and our JV partners in both countries on moving these exciting projects towards development,” he added.
Lapsset is recognized by the African Union as a continental project, and the pipeline is its major component, and as such it is expected to move onward with speed.
According to Kamau, China Exhim Bank, International Monetary Fund and African Development Bank have shown huge interests in funding the crude oil pipeline.
The African leaders at the summit agreed to construct “two crude oil pipelines, one from Lokichar to Lamu and another from Hoima to Tanga” developed by Kenya and Uganda respectively.”
Dismissing the prospect of Kenyan oil being transported through the Tanga port as well, Kenya’s energy secretary Joseph Njoroge said last month, “It’s a figment of an idea. It can never be.”
Image credit: PPU
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