Ugandan pipeline poses regional diplomatic worries

12 April 2016, Week 14, Issue 634

The route of a proposed pipeline, designed to carry Ugandan crude oil from Lake Albert to the Indian Ocean for export, is becoming a regional diplomatic issue. The plan for a pipeline to the port of Tanga in Tanzania, rather than via Kenya, appears to be on the front foot.

The presidents of Uganda and Kenya – Yoweri Museveni and Uhuru Kenyatta respectively – agreed in August 2015 on a route for the pipeline that would take it to the Kenyan port of Lamu, making it part of the US$26 billion Lamu Port South Sudan-Ethiopian Transport (LAPSSET) project, which would include roads and a railway. The Tanzanian route was mooted in October last year and, in early March, Uganda and Tanzania announced that the pipeline would take a southern route to Tanga. Museveni and Kenyatta met in March but failed to confirm the route through Kenya. They agreed to meet again after a joint committee had completed an analysis of all three routes. In the meantime, competition between Kenya and Tanzania for the pipeline is growing. During a recent visit to Paris, Kenyatta met with representatives of Total, which is one of the three international companies drilling for oil in Uganda and which supports routing the pipeline through Tanzania on the grounds that costs will prove to be cheaper. The route through Tanzania is estimated to cost around US$4 billion, while the route through Kenya is put at around US$5 billion. Total also argues that because the Kenyan route will take the pipeline close to war-ravaged Somalia, it will be safer to send the pipeline to Tanga. Total, which has said that it has evaluated the proposed routes for the pipeline, is reported to have raised the US$4 billion needed for the southern route. Total, CNOOC Ltd and Tullow Oil are developing Uganda’s oil resources in the Hoima region, which the country estimates at 6.5 billion barrels. Only the Chinese company has been awarded a production licence to date. Uganda’s proven resources amount to some 1.7 billion barrels. Tullow’s vice president for African business, Tim O’Hanlon, stated recently that Tullow thinks of the pipeline as “an East Africa integrated regional infrastructure and the opportunity cost of Uganda and Kenya not co-operating on the pipeline is enormous.” Tullow is also active in Kenya, in the South Lokichar Basin, where it has discovered 600 million barrels of oil. A pipeline passing through Kenya would also serve to transport Tullow’s Kenyan oil to an export terminal. “A joint pipeline has real tangible economic value, measurable value for individual countries Uganda and Kenya, and East Africa in general,” O’Hanlon was reported as saying by Bloomberg. For its part, Kenya has said it would build its own pipeline if the agreement with Uganda did not materialise. “Whatever the outcome, we will build an oil pipeline, whether we are together with the Ugandans or not,” Kenyan Energy Principle Secretary Joseph Njoroge said last month. Given Kenya’s lower reserves the prospects for a pipeline to carry this economically are much poorer.

Edited by

Ed Reed

Editor

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