Tanzanian president John Magufuli and his Ugandan counterpart Yoweri Museveni on recently gave a green light for the construction of the 1,443km heated oil pipeline that will transport oil from Hoima in Uganda through Chongoleani in Tanga, Tanzania to the world market, saying the remaining issues should immediately be concluded.
The two leaders, who met at Chato
airport, signed the intention to start implementing the $3.5 billion project,
warning that anyone who may attempt to delay the process will be dealt with
“This is an important step towards the implementation of the project. We, the presidents, have signed and I will see who will delay it,” said Dr Magufuli during his speech.
He also revealed that Tanzania will get a 60 percent share of the profits to be accrued from the pipeline project because about 80 percent of it will lay on Tanzania’s land.
Mr Museveni said he was ready to give Tanzania 80 percent of the profits due to the fact that the largest part of the pipeline was in the country but, according to him, Dr Magufuli settled on 60 percent.
“Uganda gave up about $800 million that would have been generated in the course of 25 years just to make this project kick-off,” he said as he stressed the need for the project to start.
Uganda discovered some 6.5 billion barrels of oil since 2006 and Total and partners were developing the project. The 1,443km long heated pipeline will transport oil from Hoima in Uganda through Chongoleani in Tanga, Tanzania to the world market. The two countries were still discussing crosscutting issues on how the two sides would benefit from the East African Crude Oil Pipeline (EACOP).
It’s merely four years after Uganda abandoned Kenya in building an oil pipeline that would have transported its oil to Lamu, it has now officially signed a $3.5 billion deal with Tanzania, leaving Nairobi to walk alone. According to Tanzania’s news media.
The deal which was signed recently between President John Magufuli and his Ugandan counterpart Yoweri Museveni will see Kampala route its crude oil exports through Tanzania, through the 1,445-kilometre crude oil pipeline. The nation’s tabloid the citizen says.
President Magufuli said after inking the deal in his home town of Chato that the project “is very crucial for our people. Our signing today is a crucial step towards implementing the project which will not only create jobs, but also promote cooperation within the region, and stimulate economic development in areas the pipeline crosses,” President Magufuli said.
For his part, President Museveni said: “We want our people to work fast and start this project.”
The construction is expected to start before the end of the year and it will help Uganda exploit oil discovered near Lake Albert in 2006. Reserves in the area are conservatively estimated at some 1.7 billion barrels.
Oil firm Total, alongside China’s CNOOC, will do the construction, supported by the governments of Uganda and Tanzania.
Uganda said it dropped Kenya after it realised it would be cheaper using Tanzania’s Tanga port.
President Museveni’s government also said the Kenyan route would delay the project, as it lacked roads and was always affected by monsoon winds for up to three months annually.
A report by Ugandan experts also concluded it was harder to secure land in Kenya, since it takes about 24 months to compensate land owners and get down to work.
On the contrary, since the Tanzanian government owns all the land, access would be easier.
The other deal breaker for Kenya was security. Lamu is seen as closer to Somalia on the Indian Ocean than Tanzania, feeding into fears that the pipeline could be a target for Al-Shabaab. The fact that the Tanga port was already operational gave it an edge over Lamu, which is still under construction.
Kenya had banked on Uganda to join hands in building the critical infrastructure, which has been blamed for the delays in commercialisation of its oil finds.
Abandoned, Kenya will now go it alone, and has maintained it will build its KSh121.45 billion pipeline from Lokichar, where it struck oil in Turkana County, to Lamu, where it is building its port.
Budget estimates show that the State Department for Petroleum plans to spend KSh648.5 million in the financial year starting July 1 on the oil pipeline, commonly known as Project.
The allocation is in addition to the KSh777.5 million allocated in the current financial year to undertake research, feasibility studies, project preparation and design for the project. Official timelines now show that Kenya’s pipeline will be completed in the second half of 2023 and not June 2022, as earlier planned.
The pipeline project is under a joint partnership between the Kenya government and the oil companies’ consortium of Tullow Oil Kenya B.V, Africa Oil Turkana Ltd and Total Oil (formally Maersk Oil).
Ironically, French Oil giant Total, which is also eyeing to do the Kenyan pipeline, has widely been seen as having had a hand in the decision by Uganda to change its route from its major trading partner.
This comes shortly after Total, the majority shareholder in Uganda’s oil fields, reached an agreement on the pipeline with Uganda’s government.
Estimates show that about 80 percent of the pipeline will run through Tanzania and the project is expected to create more than 18,000 jobs for Tanzanians.
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