French oil major Total S.A has said it will finance the development of the $4b (Shs13 trillion) crude oil export pipeline from Uganda’s Albertine Graben to Tanzania’s Tanga port at the Indian Ocean.
Mr Javier Rielo, the Total East Africa vice president, on Monday, assured Tanzanian President John Magufuli that “the company will begin construction of the pipeline project to transport oil from Uganda to Tanga as soon as possible, for funds to implement the project exist.”
According to a statement by the Tanzanian presidency, the two held talks on Monday at the State House in Dar es Salaam.
Mr Rielo, said, the statement indicated that the company “intended to spend nearly $4b on the project.
The meeting was also attended by the Tanzanian Energy minister Sospeter Muhongo who, according to the statement, expressed readiness to kick start the project immediately.
The news of the financing the 1,410-kilometre (876-mile) pipeline comes two weeks after the President Museveni and President Magufuli, meeting on the sidelines of the 17th Ordinary East African Community (EAC) summit in Arusha, “agreed” to develop the infrastructure via the southern route.
Uganda and Tanzania had last year in October signed a Memorandum of Understanding (MoU) for the development of the project after, leaving the earlier proposed route via Kenya hanging in balance.
Following the Uganda-Tanzania deal early this month, Daily Monitor understands, Kenya has since put the spanner in works in a bid to salvage the deal—since the country is also currently in exploration stage for cumulative commercial oil quantities in the Northern Lockichar basin—and the pipeline project [from the Albertine via Lokichar to Lamu port] is an advantage to export its crude to the international market.
In 2013, Kenya and Uganda hired the Japanese engineering and consulting firm, Toyota Tsusho, to conduct a feasibility study on the proposed routes for the pipeline and recommended the Lamu route.
The route to Kenya is approximately 1,120km with a tagged cost of $4.5b (Shs14.9 trillion).
The International Oil Companies (IOCs) UK’s Tullow Oil PLC, Total E&P and China’s Cnooc, currently licenced to operate in Uganda, will finance the project.
An official in the Energy ministry told Daily Monitor that the Kenyan government had expressed “consternation” at the Tanzanian deal, but expressed immediate willingness “to revive” discussions with Uganda.
“They also want the deal badly,” the official said. Government technocrats were not ready to comment on either development.
Kenya and Uganda inked an MoU last October for the Lamu route but Kenya vociferously contested some of the preconditions such as guaranteeing upfront financing for project and the attendant infrastructure, guaranteeing transit fees/tariff not higher than any of the alternative routes, and most crucially guaranteeing security—since the project stop point [Lamu] at the Indian Ocean coast borders the restive Somalia to the North.
Daily Monitor also understands that Uganda and Tanzania are still furthering discussions on the southern route.
However, with both Kenya and Tanzania jostling for the deal and notwithstanding the MoUs, the official position of Uganda remains in suspense.
The pipeline is among the proposed key upstream infrastructure required before Uganda leaps forward to the next development/commercial production phases.
Other infrastructure included a $4b oil refinery, whose tender was last year awarded to Russia’s RT.
The refinery will be financed/owned in Public Private Partnership (PPP) arrangement with government in a 60:40 equity ratio.
However other East African countries are set to buy stakes in the project to facilitate its financing.
Currently Uganda’s oil volumes stand at 6.5 billion barrels but there are indications could soon hit the 8 billion barrels mark.