Kampala- Tanzania has allowed Uganda to construct a $4b (Shs13.3 trillion) oil pipeline through the southern route.
The oil export pipeline will connect Uganda to the northern part of the Indian Ocean through Tanga Port.
The deal ends months of speculation by geopolitical analysts since Uganda singed last August a Memorandum of Understanding (MoU) with Kenya proposing to construct a pipeline through the north-eastern route to Lamu Port.
The deal was reached on Tuesday between Mr Museveni and President John Pombe Magufuli in Arusha ahead of the 17th Ordinary East African Community summit.
In a statement issued by Ms Linda Nabusayi, the President’s spokesperson, the two leaders agreed that the “two countries develop an oil pipeline between Tanga and Uganda”.
It will cover an estimated 1,120km from the Albertin Graben oil region in south western Uganda.
The project, according to the statement, is expected to employ about 15,000 people from both Uganda and Tanzania.
Uganda and Kenyan last year had signed a MoU to facilitate the pipeline from the Albertine region, via Karamoja and the Lokichar/Turkana basin where Kenya is currently exploring its oil reserves.
The restive security situation in the Turkana, an area largely inhibited by the Pokot, however, provoked jitters from some industry players over the route.
Kenya had also contested some pre-conditions set by Uganda such as guaranteeing upfront financing of the project and other supporting infrastructure needed, guaranteeing transit fees/tariff not higher than any of the alternative routes, for the pipeline to go through Kenya.
The Kenyan route is estimated at about 1,500km and would connect to Lamu Port, where the governments of Ethiopia, Kenya and South Sudan are working an ambitious Lamu Port Southern Sudan-Ethiopia Transport infrastructure corridor.
Japanese engineering and consulting firm, Toyota Tsusho, which had in 2013 conducted feasibility study, recommended the Kenyan route, saying it was a cheaper option. The report was shared by both governments.
Pushing for the pipeline
Oil companies such as Tullow, Total E&P and CNOOC are pushing for the pipeline.
Tullow, which is also working in the nascent Kenyan oil industry, is routing for the northern route with Total E&P pushing for the southern route.
In a meeting with President Museveni at the close of last year, Mr Patrick Pouyanné, the Total chief executive officer emphasised his desire for the pipeline to pass through Tanga.
The pipeline will supplement the 30,000 barrel per day oil refinery that government is pushing. The tender was recently awarded to RT Global Resources a consortium, led by Russian firm Rostec. It will cost about Shs13.3 trillion ($4b).
Uganda’s oil volumes, current are estimated at 6.5 billion barrels from 40 per cent of acreage that has been appraised so far.