Government of the Republic of Uganda, the Government of the United Republic of Tanzania, the Tanzanian Petroleum Development Corporation and Total E&P Uganda have a today signed a Memorandum of Understanding on the crude oil pipeline development principles.
The MOU also provides for other participants to join in the process of assessing and developing this route option creating a working framework for the potential development of a crude export pipeline from Hoima to Tanga Port of Tanzania.
According to the parties the objective is to select a route that will result in the lowest unit transportation cost that constitutes the most viable option for the heated crude export pipeline. .
“If we can be able to get least cost pipeline route to the East African Coast, our crude oil will be exported. As a country, we are evaluating the routes with the idea that we have the least cost route because we would like to ensure that our crude oil has value,” says Dr Fred Kabagambe-Kaliisa, the Permanent Secretary of Uganda’s Ministry of Energy and Mineral Development.
A view shared by the acting Permanent Secretary of Tanzania’s Ministry of Energy and Minerals Ngosi Mwihava who reiterated the need for due diligence.
“This infrastructure will stand the test of time in our regional cooperation. The due diligence is valid exercise because you have to justify the route you are going to consider to justify the least cost option,” he said
Tanzania is already carrying out exploration work along the proposed route with Mwihaya adding that any potential discovery will further enhance the economics of the project.
Total which has been pushing for this route against the earlier agreed Hoima- Lokichar- Lamu route agreed between Uganda’s president Yoweri Museveni and Kenya’s Uhuru Kenyatta described the MoU as a key milestone of achieving the least cost option to transport Uganda’s crude oil to the Indian Ocean Coast.
We look forward to fine tune the process adding that Total E&P is committed to supporting the route and collaborating with all the partners involved,” Adewale Fayemi, the General Manager Total E&P Uganda said.
James Mataragio, the Managing Director TPDC adds the undertaking is a great project and would create opportunities for the people of Tanzania.
Should the pipeline follow the southern route this will be a big blow to the Kenya backed Lamu Port South Sudan Ethiopia Transport corridor LAPSSET that connects East Africa to West Africa and which has the pipeline as a key infrastructure. It will however be a big win for Total which has been backing the Tanga route.
Kenya had in September said it was hopeful that Uganda’s president would keep his promise in early August.
With the two routes pundits think that the middle route that goes through Eldoret might carry the day as a bargain by both sides especially that one of the private players Tullow Oil has interest in both countries at the Albertine basin and Lokichar basin in Uganda and Kenya respectively.
The route could also cause a rift between the two East African nations with Kenya having backed Uganda’s Hoima based refinery 60,000bpd by promising to invest into it alongside Rwanda with the three having sidelined Tanzania in what has been termed the coalition of the willing despite the latter also being a member of the East Africa Community.
Tanzania however has an advantage over its Northern neighbor being that it is considered by investors more stable especially compared to the northern Kenya region while the topography to the south is more favorable.
Kenya on the other hand has the advantage of having an investor with shared interest, is shorter in distance and has also discovered oil unlike Tanzania which has been more successful in gas thus the pipeline can also oil from Kenya. To the north South Sudan also has significant oil reserves.
On the economics side it is estimated that it would cost about $500 million more to build the Tanzania route with the estimated cost of moving commodities through the northern route estimated at $15.2 per barrel as compared to $15.6 through the Southern route.