16 October 2007

Uganda: Kampala-Kigali Oil Pipeline Estimated at $ 193.6 Million

Kigali — Construction of the much needed oil pipe-line from Eldoret (Kenya) via Kampala (Uganda) to Kigali will cost stake holders in the projects up to U.S.193.6 million dollars (about Rwf 106 Billion), a senior official with the company the carried out the study has revealed.

According to Mr. Christopher Ellsworth, the Director of Energy Markets and Forecasting with the U.S.-based Science Application International Corporation (SAIC), the pipeline has been valued at the cost of U.S. $ 193.6m for the 2010-2020 period at the levelised tariff of U.S.$ 42.44 cubic meters.

"This is below the current U.S. $ 48 per cubic meter through trucking costs which indicates that the pipeline is economically superior to current the transport mode" said Ellsworth.

The U.S. expert has been in Kigali where he also attended the government sponsored workshop last week to assess the progress of the pipe-line project. The firm was contracted earlier this year to carry out the feasibility study for the project.

Mr. Ellsworth said a preliminary review of the population centers, topography and existing road network connecting Kampala, Kigali and Bujumbura indicates that the pipeline will follow the existing main road high-way.

Increased demand for petroleum products as the economies of Rwanda, Burundi and Uganda boom has left the Kenya Petroleum Corporation unable to pump enough supply. The company said last year that it needed 145 million dollars over five years to upgrade its pumping capacity including a Mombassa-Kisumu pipeline.

The three countries have been sourcing products from the Eldoret refinery that could not cope with demand forcing countries to buy directly from Mombassa and Nairobi. A Chinese firm has already started construction of the pipe-line extension from Nairobi to Kisumu in Western Kenya.

Mr. Ellsworth however, said the Kigali - Bujumbura section of the pipeline extension estimated at a nominal $53.7 million is economically unviable compared to the current cost of trucking.

"The levelized tariff is U.S.$ 55 per cubic meter which is far above the current U.S.$ 40 by trucking cost", he explained adding that for the case of Burundi, the pipeline may not be extended before 2020 when it could be economically feasible.

Rwandan officials want the pipe-line operational within the next three years but observers say the scheme depends on the willingness of the Ugandan government.

Sources contend that the effective implementation of the pipeline to Kigali will entirely depend on the seriousness of the Kampala regime to extend the pipeline from Eldoret to Kampala, given the recent discovery of oil deposits.

The Rwanda State Minister for Communications and Energy Eng. Albert Butare told RNA that discussions with Ugandan and Kenyan officials have yielded a "way forward".

The first meeting between the three governments was held in Kampala on June 18 to discuss the institutional framework through which the project will be implemented. On August 30, a draft Memorandum of Understanding that proposed creation a Joint Coordination Commission was finalized.

It is also anticipated that entry into the East African Community by Rwanda and Burundi could play an important role in facilitating the structures and activities necessary for the project implementation.

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