Technical teams examining the most cost effective route for an export pipeline for Uganda’s 6 billion barrels of oil are said to have settled on the most southern route through Tanzania’s Tanga port according to a source who talked to OilNews Kenya on condition of anonymity.
This revelation is a big blow for the Kenyan government and Tullow Oil which have put up a spirited fight for the northern route through the Lokichar oil fields and who have spearheaded a campaign to see theroute reversed after Tanzania’s president John Maghufuli and Uganda’s Yoweri Museveni announced they had agreed on the southern route.
Among incentives that would have led to the decision include the proclamation by Tanzania that they would waive tariffs for the pipeline against a $12 per barrel tariff Uganda would have paid for the Kenyan route.
Kenya is also said to have been against the southern route through Kenya that would have seen the pipeline pass through densely populated areas in the rift valley leading to expensive compensation despite the route said to have received backing by among others Total E&P the party that was against the northern route.
Besides the cost perspective Total E&P has been against the Northern route due to its proximity to Somalia which it said would make it a target for sabotage by the Alshabaab terrorist group.
Options for Kenya
If proven true the result leaves Kenya in a catch 22 situation with options whether to construct a pipeline westward towards Hoima to join the agreed route or o go it alone all together.
The first option is almost a foregone NO mention in Kenya with already many Kenyans displeased with the turn of events and with the many proclamations from government officials that Kenya will ‘go it alone’ should a deal with Uganda fail.
The second option is still feasible as Kenya has been trying to create a logistics hub for East Africa and the northern route could attract South Sudan which has been paying $25 a barrel for transportation through Kharoum.
The latter is likely however to hit a hitch due to lack of financing as Total E&P had already set aside funds for the southern route.
No win for both Uganda and Kenya
While Tanzania is surely the winner in all this the producing countries will ultimately pay more for separate pipelines than for a joint venture. It is estimated that the southern route will see cost at $14 per barrel for Uganda as compared to $12 per barrel in a shared pipeline with Kenya while Kenya’s will surely rise to over the $9 per barrel earlier projected in a shared pipeline scenario.
The announcement on the findings of the technical teams from Kenya, Uganda and Tanzania are expected to be made public at the 13th Northern Corridor Integration Projects (NCIP) summit in Kampala kicks off today