Wednesday April 4 2012

Tamoil pipeline deal expires

By Isaac Imaka

Seven years after failing to deliver, Tamoil East Africa Limited is yet to know its fate over its expired agreement to construct a Shs756 billion fuel pipeline from Eldoret to Uganda.

A source in the ministry of Energy told Daily Monitor that although Tamoil’s agreement with government expired in November last year, officials in the ministry of energy could be planning to extend the contract without following the due process of advertising the offer and opening it up for bidding.

In 2007, Tamoil, a Libyan company, won the contract to construct an oil pipe line to transport refined oil from Eldoret to Uganda- but the company has not done anything and it has been asking the two governments to extend the deadlines.

Uganda has continued to struggle with insufficient fuel supplies due to supply chain problems that are partly occasioned by the challenges of accessing refined oil.

Mr Habib Kagimu, the chairman of Tamoil could not be reached to explain why the company has failed to honor the agreement but the spokesperson of the ministry of Energy, Mr Bukenya Matovu said the agreement has not officially expired and the situation is being studied by the two countries, pending a conclusive decision.

Mr Matovu said Tamoil had applied for the contract to be extended but the Joint Coordinating Commission [JCC] didn’t respond to the request.

JCC is a body set up by the governments of Kenya and Uganda in October 2000 under the memorandum of understanding with the objective of implementing the project on behalf of the governments.

“The final investment decision date was not extended and therefore the Joint Coordinating Commission between Uganda and Kenya didn’t terminate the agreement,” Mr Matovu said.

“What is important to note is that Tamoil East Africa had requested for an extension of the joint investment decision date and JCC accepted with conditions. The deadline was pushed to 30 November 2011 then later Tamoil requested JCC to extend it to March 31 2012 but JCC didn’t respond to the request and the deadline expired.”

The issues at stake
Yet to negotiate. According to Mr Matovu the two countries will be meeting later this month with officials from Tamoil to consider the situation and agree on a way forward
Denying claims. Mr Matovu also denied claims from a whistleblower in the ministry that officials were planning to extend Tamoil’s contract without following due process.
Paying for damages. In the event of failure by the company to deliver the services it was contracted to do, the government is protected by a clause in the agreement that failure by Tamoil to deliver the project is a breach of contract and Uganda can sue and compel Tamoil to pay for damages