The presidents of Uganda and Tanzania will lay the foundation stone for the construction of East Africa’s first significant oil export pipeline.
Yoweri Museveni of Uganda and his Tanzania counterpart Joseph Magufuli signed a project agreement that should see Uganda finally able to export oil in 2020, more than a decade after it was first discovered.
Uganda was expected to develop a pipeline through Kenya rather than Tanzania, providing potential linkages with Kenyan oil discoveries, but last year Kampala announced that it wanted to build a line to the northern Tanzanian port of Tanga.
The decision appears to have been motivated by fears over the potential for Somali militant attack on the proposed pipeline through Kenya.
At 1,445 kilometers, the line is expected to become the longest heated pipeline in the world and will transport oil from Uganda’s remote Holma District around the southern shores of Lake Victoria and eastwards to the coast. It is expected to be completed by 2020 and It will carry 216,000 b/d.
$3.5 billion is expected to be the construction cost. Tanzania is expected to receive $12.20 in transit fees for each barrel transported.
Oil was first discovered in the Lake Albert Basin in 2006. There was a long tax dispute over explorer Tullow’s acquisition of all equity in the relevant blocks — Exploration Areas 1, 1A, 2 and 3A — from Hardman Resources in 2007 and its sale of one third stakes to both Total and China National Offshore Oil Corporation in 2011.
The balance of the upstream consortium changed again earlier this year, when Tullow sold another 21.57% to Total for $900 million. Tullow’s remaining 11.76% interest will fall to 10% when the Ugandan government exercises rights to buy back into the project.
The farm-down appears to have been prompted by the impact of the Ugandan delays, slow development of Tullow’s TEN project in Ghana, exploration disappointments elsewhere and low oil prices. The pipeline will be owned by Uganda National Oil Company, the three upstream partners and Tanzania Petroleum Development Corporation.
Uganda’s plans for a large 200,000 b/d domestic refinery also held up development, but the government now seems to have accepted the construction of a much smaller plant, in the short term at least.
In August, Saipem and GE were revealed as the winners of a tender to build a refinery with an eventual capacity of 60,000 b/d, which is more than double Uganda’s current consumption, with the remainder expected to be exported to neighboring states.