25 April 2016

Uganda's Pipeline Will Go South, Kenya to Proceed With Own Plans

Photo: The East African
(file photo)

Uganda and Tanzania have finally entered a deal that will see an oil pipeline deliver the former's crude oil to the Tanga port along the North Eastern coast of Tanzania.

President Yoweri Museveni announced the decision in Kampala over the weekend as he closed a meeting of East African leaders called to fast track infrastructural projects in the Region.

Dubbed the 13th Northern Corridor Infrastructure Projects (NCIP), the meeting attracted co-founders, Kenya's President Uhuru Kenyatta and Rwanda's Paul Kagame, as well as representatives from South Sudan, Tanzania, Ethiopia and top oil industry executives.

The signing of the four billion-dollar pipeline deal puts an end to several years of speculation and intense negotiations on what is seen as the most critical infrastructure project for Uganda's oil industry. The push for the pipeline to go through Tanzania rather than Kenya was given a lot of weight by French Major Total SA. The company has repeatedly expressed its preference for the 'southern route' and its willingness to bankroll the project. Its counterpart, Tullow Oil, was in favour of the Kenyan route.

In the end, Uganda chose the Tanzanian route, that is cheaper (at $3.55 billion), more secure and likely to be completed faster according to the Gulf Interstate Engineering study that was commissioned by Total. Not only is the Lamu route more expensive, costing around $4.2 billion, it is also reportedly vulnerable to bad weather and insecurity as it boarders with the volatile Somalia.

Two pipelines

Despite that decision, Kenya will still go ahead and construct its own pipeline to evacuate its oil resources from the Turkana area. President Museveni further revealed over the weekend that he had "agreed with President Uhuru Kenyatta that the two pipelines go ahead". Kenya's pipeline will pass from Lokichar to the Lamu Port. The Kenyan President had been pushing to have Uganda opt for the Lamu route as this would increase his country's stake in the region's oil sector but also bolster Kenya's most ambitious infrastructure project--the $25 billion LAPSSET project that is supposed to connect Kenya to South Sudan and Ethiopia with ports, roads, railways and oil pipelines. Kenya's case was further made by the Toyota Tsusho Corporation feasibility study completed in 2014 that indicated the Kenyan route was more feasible.

During a three-day state visit to Uganda, President Kenyatta even offered to find the financing for the Lamu pipeline. At the time, Kenya appeared a clear favourite. However, Tanzania got the upper hand early this year when President Museveni and Tanzania's Magufuli met at the 17th Ordinary East African Community (EAC) summit. Sources say the deal was closed then.

For both pipelines, the next phase is raising the massive finances needed to start construction.

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