23 April 2019

East Africa: London to Arbitrate EA Oil Pipeline Project Rows

Photo: The Citizen
Tanzania will upgrade road that crude oil pipeline passes from Uganda.

The UK will host arbitration talks in case of disputes arising out of the East African crude oil pipeline project, ending months of haggling between the governments and oil companies.

Arbitration was one of the issues that were deferred during a technocrats meeting held in Kampala in January.

"Arbitration is now agreed," said Peter Muliisa, a legal officer at the Uganda National Oil Company -- one of the joint venture partners in the project -- without naming the venue.

But sources told The EastAfrican that arbitration will be done in London should any dispute arise. Tanzania had initially said it would host the arbitration, but the other partners preferred a neutral country.

Now, expropriation remains the most critical pending issue in the ongoing host government agreement (HGA) talks. Investors want the expropriation clause to ensure that host countries that provide land do not turn around to claim it before expiry of project.

Permanent Secretary in Uganda's Energy Ministry Robert Kasande said that progress is "being made," and that only a few issues remain unresolved.

"We should close these negotiations by the end of May," he said.

The 1,445km export pipeline is expected to transport Uganda's crude oil from Kabaale, northwest of Kampala to Chongoleani peninsula, to Tanga port in Tanzania. The 24-inch diameter pipeline will have a flow rate of 216,000 barrels of crude per day.

The question of expropriation and overall security for investors emerged earlier this month at a media conference hosted by the Uganda Chamber of Mines and Petroleum.

"In consideration of the final investment decision, the investors are looking at the security of their investments and policies, and asking whether contracts are solid," said UCMP chairman Elly Karuhanga.

Tanzania, Uganda and the joint venture oil companies -- Total E&P, Tullow Oil Uganda and China National Offshore Oil Company -- are expected to speed up negotiations that will lead to the signing of agreements on the HGA, transportation and shareholding. The final investment decision is expected in June.

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