Following a week of tense negotiations, Uganda and Tanzania agreed on January 25 to sign host government agreements for the East Africa Crude Oil Pipeline by June 2019. Tullow Oil, in a mid-January update, said it had been targeting an FID in the first half of the year, following completion of the government agreements.
During the talks, the two sides agreed on most crucial issues related to the host government agreements, Tanzanian Energy Minister Medard Kilimani told reporters. The agreements must be designed to ensure both countries benefit from transportation of crude to international markets via the 1,445-km pipeline.
Unnamed sources told local media that talks on revenue sharing, taxation and local content in terms of jobs during construction of the US$3.5 billion pipeline from Hoima in Uganda to Tanga in Tanzania had not been concluded.
The protracted nature of the negotiations, which have been under way since 2018, have not affected preparations towards the US$3.5 billion construction of the pipeline, which should complete within 36 months of the host government agreements being signed, Kilimani said.
Tanzania has already identified a location for the construction of five oil storage tanks, each of which will have capacity to store half a million litres of oil, he added.
Another milestone was also reached earlier this month with the finalisation of the pipeline’s Environmental Social Impact Assessment (ESIA), which has now been handed over to Uganda’s National Environmental Management Authority (NEMA).
Conducted by Gulf Interstate Engineers, the study evaluates potential environmental and social risks associated with the pipeline, as well as possible mitigating measures, and is a key step towards the project’s approval by Uganda.
The project has faced a number of hurdles, including disagreements over how much Uganda should pay Tanzania for crude flowing through the link. The two sides had initially agreed on US$12.20 per barrel, but the joint venture partners later raised their requested fee to more than US$15 per barrel. An FID for the pipeline, which will have capacity to transport 216,000 bpd of crude, is now expected to be made towards the end of this year.