Tanzania-Uganda oil pipeline faces delays

Agreement. Energy minister Irene Muloni exchanges the inter-governmental agreement between Uganda and Tanzania for the East African crude oil pipeline with Tanzanian minister of constitutional and legal Affairs Palamagamba Kabudi in May this year. Host government Agreements to be signed in January. PHOTO BY ALEX ESAGAALA

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Issue. The financial model seems to be one of the major reasons the companies have not yet made the final investment decision.

DAR ES SALAAM. An initial plan for Tanzania and Uganda to have first oil flow in 2020 through the Uganda-Tanzania crude oil pipeline is under threat as investors have been delaying to make final investment decisions, the Ugandan minister for energy and mineral development, Ms Irene Muloni, has revealed.
“Indeed, the plan to have the first oil by 2020 is under serious threat because it takes about three years of construction… As I am speaking right now the final investment decision has not yet been made yet,” Ms Muloni said.

It was expected that the companies would have made their final investment decision last year, meaning by now they would have started constructing the pipeline, which was scheduled to be ready by 2020.

Total Oil of France, China National Offshore Oil Corporation and Tullow Oil of the UK are the companies involved in the project.

The financial model seems to be one of the major reasons the companies have not yet made the final investment decision.
“One of the reasons for choosing the Hoima-Tanga route was because it was the least costly, not more than $12.2 [Shs45,700] per barrel of oil transported through the pipeline. That was the understanding and agreement.
“But as we are trying to finalise the [negotiations], the financial model brought out different issues, which were going to go beyond what we had agreed upon and that held us back,” she told reporters after a joint Tanzania-Uganda meeting on Friday.

She added: “We needed to negotiate and discuss and agree so that [the companies] are able to move again…
“We have been able to communicate with the companies what our expectations are, and now we have to harmonise our understanding with the government of Tanzania so that each one of us enters into the Host Government Agreement (HGA) with the pipeline companies so that work can commence…”

Ms Muloni said the HGAs would be signed next month.
“We had hoped that we could sign the HGAs before the end of this year but we have pushed it to January to enable the conclusion of the issues of concern.”