Pipeline: Stepping stone for Japanese financiers

Monday October 8 2018

The oil sector has been attracting a lot of

The oil sector has been attracting a lot of financing from other countries including Japan. FILE PHOTO 

By FREDERIC MUSISI

Tokyo. The Japanese external trade promotion agency, (Jetro) has described the proposed crude oil export pipeline from Hoima to Tanga port in Tanzania, as “an attractive venture” and possible stepping stone for Uganda’s financial break out in Africa.
Dr Katsumi Hirano, the Jetro executive vice president, told Daily Monitor in an interview in Tokyo, Japan that they have, for long, waited for massive projects within East Africa to prop up Japanese banks.
French oil giant, Total E&P, tapped Sumitomo Mitsui Banking Corp to advise on the financing of the oil pipeline, which could open up the way for Japanese banks into the region.
“For long, we were waiting for Japanese banks to venture into East Africa. We are really pleased now to see Sumitomo Mitsui Banking Corp involved in the oil pipeline financing, which is one of the setup investments,” he said.
Sumitomo Mitsui Banking Corp is the second largest bank in Japan by assets and is advising Total E&P on attendant issues such as sourcing finances, assessing anticipated costs and benefits of funding options.
The bank is working with Standard Bank Group as the financial adviser for Uganda and Tanzania and China’s Industrial and Commercial Bank of China on behalf of Chinese company, CNOOC.
The 1,445-kilometre East African Crude Oil Pipeline will be financed through a mix of debt and equity.
Uganda’s 15 per cent equity in the project will be carried through the National Pipeline Company, a subsidiary of the Uganda National Oil Company, which is mandated to oversee the country’s commercial interests in the petroleum sector.
Uganda and Tanzania are working on the finer details among them the Host Governments Agreement, which defines the rights and obligations between each country on the project as well as the Final Investment Decision to pave the way for construction expected later next year.

Functionality remains a big question given that large trading countries such Nigeria, Africa’s largest economy, have stayed away.
Other countries that are yet to commit include Namibia, Sierra Leone, Zambia, Botswana, Lesotho, Eritrea, Zambia, Burundi, Benin and Guinea Bissau.

Key Market

According to Dr Hirano, Uganda and other East African Community member states must leverage on the 55-member African Union family under the recently signed Continental Free Trade Agreement to attain desired growth and demand in the oil sector.
Forty four African countries in March signed the CFTA to create a single continental market for goods and services with guaranteed free movement of persons and investments.

he CFTA is currently the world’s largest free-trade area. Uganda is among signatories of the CFTA.
However, how to implement its functionality remains a big question given that large trading countries such Nigeria, Africa’s largest economy, have stayed away.
Other countries that are yet to commit include Namibia, Sierra Leone, Zambia, Botswana, Lesotho, Eritrea, Zambia, Burundi, Benin and Guinea Bissau.

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