14 June 2017

East Africa: Why Tanzanians and Ugandans Should Cheer Tanga-Hoima Pipeline

Photo: Daily News
Crude oil pipeline.

SIGNING of Host Government Agreements (HGA) between Tanzania and Uganda is on the cards, giving a gesture for fast tracking the construction work for Tanga- Hoima oil pipeline.

The HGA, which will come after the two countries inked the Intergovernmental Agreement (IGA), defines rights and obligations between each State on the project, and will be ratified by the respective parliaments. Many HGAs include a stabilisation clause designed to minimise the financial and political risks posed to foreign investors as a result of sudden changes in national law.

It is the agreement which is often required by foreign investors in countries where foreign investors' rights are not otherwise protected by a bilateral investment treaty.

The latest move on May 26 this year, was the symbolic signing of the 3.55bn US dollar Intergovernmental agreement (IGA) in Kampala, Uganda by the Minister for Constitution and Legal Affairs, Prof Palamagamba Kabudi and Ugandan Minister for Energy, Eng Irene Muloni, paving the way for the construction of a 1,443-kilometre pipeline.

The two ministers put pen to paper hardly five days after President John Magufuli and his Ugandan counterpart, Yoweri Museveni signed a communiqué upon completion of discussions on sections of the contract.

The Uganda-Tanzania Crude Oil Pipeline (UTCOP) would travel in a general south-easterly direction to pass through Masaka in Uganda to Bukoba in Tanzania, and loop around the southern shores of Lake Victoria, continue through Shinyanga and Singida, to end in Tanga, a distance of approximately 1,410kilometres (880 miles). Uganda has proven oil reserves exceeding 6.5 billion barrels, of which about 2.2 billion barrels are recoverable.

The country plans to build a refinery in the Western Region to process what is needed locally and regionally, with the rest exported via pipeline to the Indian Ocean coast.

The Tanga route, according to feasibility studies, was deemed the cheapest for Uganda to transport its oil from the production point in Hoima to the international market. It has convenient flat terrain, not interrupted by other activities, as well as lowest environmental challenges, and provides the shortest schedule for it to see the first oil export - earliest in mid 2020.

President Magufuli commended Uganda for choosing the Tanga route for the pipeline, which he said: "will not only create employment, but also is a source of revenue for both countries." Construction of the pipeline, expected to commence early 2018, is projected to take 36 months with prospect of between 6, 000 and 10, 000 jobs created.

Dr Magufuli described it as important for the development of the two countries and East African region in general. The Head of State appreciated President Museveni for being instrumental in propelling the project, which signified the solid friendship between the two countries.

According to President Museveni, the project will also make fuel cheaper hence foster aviation industry, whereby regional airlines will get cheaper jet fuel. Prof Kabudi stated that project implementation would open up the region for further opportunities for trade, and in turn fast track socio-economic development.

When visiting Tanga region last year, members of the East African Legislative Assembly expressed optimism that the pipeline to export crude oil from Hoima will attract massive investment and create jobs which citizens can take up.

For that matter, EALA members who have been visiting different parts of East Africa challenged the Tanga regional leadership to exploit the opportunities that arise from the construction of the crude oil pipeline by coming up with a strategic investment profile that will attract prospective investors.

The regional legislative Assembly members said Tanga must prepare and sell itself to prospective investors locally and internationally. A member of the EALA, Mr Adam Kimbisa, said after touring the region that the authorities should ensure that the pipeline project benefits residents and Tanzania.

Kimbisa said that EAC should bring positive changes to the lives of local people through the implementation of the regional protocol. The East African Community protocol reinvigorated and made strong the relationship between the five member states of East Africa.

Tanzania Petroleum Development Corporation (TPDC) official Aristed Katto, speaking to journalists during a workshop in Dar es Salaam, also said Tanzanians should strive to capture available opportunities in natural gas development and in the construction of oil pipeline from Uganda to Tanga port.

He sees the construction work as economic opportunity for members of the public to open catering services, security group services and establishment of colleges that will train people on pipeline construction and other related activities. Canada, for instance, has the third largest oil reserves in the world and is the world's fifth largest oil producer and fourth largest oil exporter, has benefited from the oil pipelines.

In 2015 - transmission pipeline operations of all types added more than $11.5 billion to Canada's gross domestic product (GDP) Experts also argue that transporting crude oil by rail is more dangerous than oil pipelines especially considering the fatal explosion.

The pipelines have 4.5 times fewer accidents or spills than oil-by-rail, and while every oil spill represents a catastrophe, spills from pipelines do not hold a candle to the apocalyptic aftermath of rail accidents, according to environmentalists.

Last week, the Total East Africa Midstream B.V (TEAM) announced a tender aimed at acquiring a contractor for engineering, procurement and construction management (EPcm) services for the EACOP.

The TEAM called for interested companies to secure the job through competitive tendering process to provide the services. The move signals the start of implementation of the project.

The services will include advanced safety culture and environmental awareness, provision of engineering, construction and management facilities to perform the services, procurement expertise for specified material and equipment, among others.

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