East African Crude Oil Pipeline Closer to Construction

The governments of Uganda and Tanzania, in an intergovernmental ministerial committee meeting agreed to sign the Host Government Agreement (HGA) for the East Africa crude oil pipeline by the end of June, following elongated and continued negotiations between ministers from both countries.

The HGA will detail the rights and obligations of each party which include Tanzania, Uganda and joint venture partners, Total E&P, Cnooc, and Tullow Oil ? and is a precursor to other main agreements, such as shareholders and transportation, that will be negotiated with joint venture partners before reaching a final investment by the end of the year. The meeting did not address issues of revenue sharing, taxation, or local content policy for jobs to be created by the pipeline.

The 1400m pipeline is projected to take 36 months to construct following the signing of the HGA, during which 5,000 to 10,000 direct and indirect jobs are expected to be created. The crude oil pipeline is said to extend from Hoima, Uganda to the Port of Tanga, Tanzania on the Indian Ocean.

With an overall estimated cost of $3.5 billion, only 20 percent of the pipeline’s full length will be in Uganda, and this portion is expected to cost $700 million. Uganda and Tanzania are expected to fund between 30 to 45 percent of capital expense through their respective national oil companies, Uganda National Oil Company and Tanzania Petroleum Development Corporation.

Despite prolonged negotiations, both countries have agreed to ultimately sign the agreement with the pipeline construction company and to fast track developments to produce the first oil by 2020.