Last week Tanzania and Uganda marked their commitment to the East Africa Crude Oil Pipeline (EACOP) with an inauguration ceremony in the town of Hoima, near Lake Albert, where the conduit will originate.
The cost of EACOP is an estimated US$3.5 billion and will be the longest heated pipeline in the world, which is essential to ensure the flow of Uganda’s waxy crude.
Front-end engineering and design (FEED) work for the 220,000 bpd project is due to be completed by the end of the year and a final investment decision (FID) is expected in the coming months.
Construction will be undertaken by a joint venture company comprised of the two governments and Total, Tullow Oil and China National Offshore Operating Co. (CNOOC), which are working to develop Uganda’s estimated 6.5 billion barrels of oil reserves, of which 1.7 billion are estimated as recoverable. Work will begin in early 2018 and is anticipated to take 36 months to complete.
The Hoima-Tanga pipeline comes as a disappointment to Uganda’s neighbour Kenya, which had planned to incorporate Ugandan oil production in the proposed Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor project. This would have tied all the energy resources in the region together, along with transport and other infrastructure projects to a new port at Lamu, on Kenya’s Indian Ocean coast.
Uganda had committed itself politically to the project but changed direction last year when proposals by Tanzania and companies operating in Uganda came in cheaper.
Tanzania offered Uganda tax relief, a 20-year tax holiday and a free right of way to construct the pipeline in order to secure the deal. Tanzania will receive a transit fee of US$12.20 per barrel.
Progress on the planned refinery in Hoima has yet to be reported. In August 2016, Uganda selected the Albertine Graben Consortium – led by General Electric (GE) – as the preferred bidder for the two-phase refinery project that will have an initial capacity of 30,000 bpd, later expanding to 60,000 bpd.
Uganda was forced to re-tender the project after negotiations with Russia’s RT Global Resources and South Korea’s SK Engineering and Construction collapsed.
Uganda has stated that it would prefer to keep a 40% stake in the refinery and sell shares to neighbouring countries on the basis that they will import petroleum products from the facility. The government plan includes building a products pipeline to the capital city Kampala.
