Magufuli stance, politics impact Uganda crude oil pipeline

February 16, 2019 in Business, Companies, Energy, Hydrocarbons, Infrastructure, Investment by Editor

Initially supposed to go through Kenya, the East African Crude Oil Pipeline was ijn 2017 rerouted to transit through Tanzania on Total’s insistence. The oil major was concerned about the development and security costs and their impact on the tariff

Tanzania’s insistence that any disputes arising out of the 1445km East African Crude Oil Pipeline be settled locally under Tanzanian law could cause further delays to the project’s implementation.

Total is also understood to be getting jittery about the impact new political outfit People Power on and the government response to it, on Uganda’s political stability.

Uganda and Tanzania have set June 2019 as the target for concluding technical and financial agreements. Further delays are not out of the question however, as the project’s prime mover Total E&P, is yet to accede to Tanzania’s demands that arbitration of disputes should be domiciled in Tanzania and settled in accordance with Tanzanian law.

Total is uncomfortable with this demand yet President Magufuli is not willing to concede any ground on the issue.

While a January 25 meeting in Kampala agreed on most of the heads in the agreements, officials said arbitration, revenue sharing and taxes had been deferred

Mr. Robert Kasande, the Permanent Secretary in Uganda’s energy ministry revealed as much saying the sticky issues would be tackled during a subsequent meeting in Dar es Salaam on February 7. Recent information however indicates that there was no meeting of minds on arbitration.

In Kampala, consensus was reached on registration of local proxies, investor obligations, technical standards, security of the asset, immigration, national content, project insurance, environmental obligations, investor duties, construction and operation of the project and relevant stability clauses.

Initially supposed to transit through Kenya, the East African Crude Oil Pipeline will run from oil fields in Hoima along Uganda’s boarder with the DRC and terminate at the Chongoleani peninsula near Tanzania’s Tanga port. The 24-inch pipeline will have a capacity to carry 216,000 barrels of crude oil per day at peak production.