Standard Bank Group Ltd Ugandan unit plans to raise $3 billion (Sh309 billion) for a crude pipeline by the second half of next year as the country prepares to start oil production by 2020. Stanbic Bank Uganda was appointed alongside Japan’s Sumitomo Mitsui Banking Corp as joint financial adviser for the 1,445-kilometre (898-mile) pipeline, Patrick Mweheire, the chief executive officer of the Kampala, Uganda-based business, said in an interview.
The companies will explore raising bank debt or loans from export credit agencies among the options they are considering, he said, without giving more details. The pipeline will connect Uganda’s Hoima oilfields in the west to the port of Tanga in neighbouring Tanzania. Ugandan President Yoweri Museveni and his Tanzanian counterpart John Magufuli commissioned the construction of the $3.5 billion (Sh360.5 billion) pipeline earlier this month.
Kampala said at the ceremony to lay the foundation stone for the project it picked Tanzania over its other neighbour Kenya as the route for the proposed 24-inch export pipeline because it was a “least cost and least risk” option.
“Tanzania offered several concessions to make the pipeline profitable inspite of the falling global crude oil prices,” said Museveni. The earlier proposed Kenyan route would have run through a northern region near the border with Somalia, from where Islamist militants have launched attacks on Kenya, prompting Uganda to pull the rug under her neighbour’s feet.
Tanzania agreed to waive taxes, offered to take up shares in the pipeline project and charge a tariff of $12.2 per barrel to make the project feasible, he said. France’s Total SA, China’s Cnooc Ltd and London-based Tullow Oil Plc are jointly developing the country’s oil finds. “A lot of activities are going on, a lot of tenders are being made” and expectations are that the final investment decision for the project will be made in the first quarter of next year,” Mweheire said.
Fundraising for the project won’t cause “any currency mismatch” because borrowing can be done in dollars, he said. The project will stretch from landlocked Uganda’s western region, where crude reserves were discovered in 2006, to Tanzania’s Indian Ocean seaport of Tanga. The project will become “the longest electrically heated crude oil pipeline in the world,” said Guy Maurice, Senior Vice President of Africa at Total Exploration and Production. Total is one of the owners of Ugandan oilfields, alongside China’s Cnooc and Britain’s Tullow Oil.
Tanzanian President Magufuli at the foundation stone laying ceremony urged the three joint venture partners to speed up construction of the pipeline. “We don’t need to delay the completion of the project for almost three years. They can do it even night and day to ensure the project is completed as quickly as possible,” Magufuli said.