Fifteen years after discovering commercially viable crude oil deposits, Uganda begins its final journey into production with the signing on Sunday of a landmark agreement with Tanzania and the French oil company Total.
The deal, which is expected to unlock more than $ 15 billion in investment, was signed in Kampala. President Yoweri Museveni led the Ugandan delegation, while Total President and CEO Patrick Pouyanne led the French company’s team, The EastAfrican learned.
A key element of the project is the crude oil export pipeline from Uganda to the Indian Ocean in Tanga, and Tanzanian President Samia Suluhu traveled to Kampala on her first overseas trip as head of state to sign the tripartite agreement. on behalf of your country.
The signing of the agreement was scheduled for March 22 in Kampala, but was postponed following the death of Tanzanian President John Pombe Magufuli, who was a key driving force behind the pipeline.
A deal for the $ 3.5 billion East African Crude Pipeline (Eacop) is a strategic victory for Tanzania, which will get $ 12.7 from every barrel of oil transported through it.
Longer heated pipe
At peak production, the 1,445-kilometer heated pipeline starting at Hoima in Albertine Graben in western Uganda and ending at Tanga port in Tanzania will transport 216,000 barrels of crude oil per day. Due to the waxy nature of Uganda’s oil, it will be one of the longest crude export pipelines in the world.
“Because of the pipeline, for every barrel, Uganda will lose $ 12.7 to pay for the pipeline. But why don’t we just focus on the refinery, supply Uganda and the inner part of East Africa? “President Museveni said in a television interview in Kampala last year.
The long-awaited deal allows Uganda to move forward with a project that has been plagued with delays for more than a decade since the confirmation of commercial deposits.
The country’s oil deposits are estimated to have decreased in value from $ 61 billion in 2013 to $ 18 billion in 2018 due to a drop in crude oil prices on the world market, according to the Climate Policy Initiative, a UK-based research firm.
The signing is also a presentation party for President Suluhu. After swiftly taking over internal affairs in which she made new cabinet appointments, as well as lifting a media ban, President Suluhu has begun to function since she took office last month following the death of the president. Magufuli on March 17. The agreement consolidates an infrastructure link. between the two countries, which have enjoyed warm relations for decades.
The deal is also a victory for the oil companies, Total and China National Offshore Oil Corporation (Cnooc), which have spent years bargaining with a reluctant President Museveni, to speed up the crude oil export pipeline in lieu of their favorite national refinery, for faster time to market. of Ugandan oil.
Industry sources are reluctant to disclose the summit’s talking points and expected results, but indicate that “this time there is good will to move forward after years of delays.”
However, concerns remain that Uganda has yet to secure funding to back its 15 percent stake in Eacop, with equity. Before the oil summit postponed last month.
Deputy Finance Minister David Bahati met twice with Parliament’s Economy and National Budget Committees to approve the $ 130 million loan from the domestic market to finance the stake in Eacop, but both times failed to obtain approvals. .
The money is a precondition for signing the final investment decision agreement, but Syda Bbumba, chair of the National Economy Committee, says her team of deputies has not yet approved the loan.
Due to disagreements with the oil companies, Uganda has rejected the IDF several times, causing delays in the commercialization of the resource.
The parties had set December 2020 as the deadline for FID to pave the way for the development of the Tilenga (operated by Total) and Kingfisher (operated by Cnooc) oil production projects, as well as the construction of Eacop, for 36 months, and the first oil is expected in 2024.
But the parties again failed to meet this objective due to “matters beyond the control of the oil companies”, which were Industry bodies told The EastAfrican they had to do with the pipeline funders who took a long time to give approvals.
Eacop is expected to cost around $ 3.5 billion, of which around $ 2.5 billion will be debts taken from banks and other financial entities, while 30 percent of the project is financed with company shares. Oil companies Total, Cnooc and the host government entities Uganda National Oil Company and Tanzania Pipeline Development Company.
The planned investment is the largest in Uganda’s history and is expected to unlock economic growth and opportunities in the construction, agriculture, hospitality, real estate and logistics sectors.
More than 2,000 expatriates are expected in the country to work in the oil and gas sector, as Uganda seeks to become the leading producer of crude oil in East Africa.
“The guest list is not confirmed yet, but all issues related to oil will be discussed, not just the pipeline,” said Don Wanyama, spokesman for the Ugandan presidency.
“On the issue of the pipeline, I actually agreed with our brothers in Tanzania because they are our very good friends, brothers… I don’t care if they share a bit of this. Otherwise, he would never have accepted the pipeline. “