Can Uganda’s pipeline gamble build a regional energy hub? 

This isn’t some hypothetical riddle. Uganda’s got oil. Lots of it. Government records show it’s an estimated 6.5 billion barrels of oil reserves, with 1.4 billion barrels considered to be economically recoverable.

This oil is lying beneath the picturesque Murchison Falls National Park and the depths of Lake Albert.

And the country is not hesitating - it’s drilling, and building a pipeline to ship the crude 1,443 kilometres through Tanzania to the Tanga coast, where tankers will carry it off to eager markets.

Vessels will be loaded from a dedicated facility on a two-kilometre-long jetty extending into the open sea.

Uganda’s decision to bet big on the East African Crude Oil Pipeline (EACOP) is bold.

The Central Bank is cheering to it, because it expects some revenues to finance public debt, build local infrastructure and boost foreign currency reserves. 

The project's price tag is $5b, and its profitability hinges on the roller-coaster of global oil prices. A sharp dip, and suddenly Uganda’s oil venture could be deep in the red.

Worse, the reserves for which it is built aren’t infinite. Without discoveries or breakthrough tech, the pipeline risks becoming an expensive relic.

However, project insiders such as TotalEnergies insists that the project remains viable even if oil prices drop to $30 per barrel.

Currently, government is banking on $2b over 25 years based on a $60 per barrel price. A plunge to $30 seems unlikely unless a global recession strikes.

Even then, oil experts say any dips would likely bounce back - oil prices, after all, love their ups and downs.

At regional level, competition is looming. Kenya’s LAPSSET corridor and South Sudan’s infrastructure ambitions could side-line EACOP.

Connecting South Sudan’s oil to EACOP might sound promising, but it is a long shot.

Government deals like this take years - think five to 10. Meanwhile, South Sudan’s oil reserves are shrinking, with daily production dropping from 150,000 barrels in 2018 to just 90,000 barrels by March 2024.

Building a pipeline to link up with EACOP would cost around $3b, a hefty price tag for questionable returns. It is a classic case of all cost, no value.

DR Congo could join EACOP – engineers have structured it with that in mind - but insecurity poses a major hurdle.

Even within TotalEnergies’ boardrooms, some are sceptical, pointing to the ongoing insurgency in eastern DR Congo.

A parallel situation unfolded in Mozambique, where TotalEnergies suspended its $20b LNG project in April 2021 due to escalating violence in Cabo Delgado province.

The company has since remained in Mozambique but put the project on hold to prioritise safety.

To stay viable post-Tilenga and Kingfisher oilfield projects, Uganda needs oil from neighbours such as DR Congo and South Sudan - no small feat in a politically turbulent region.

The pipeline’s hefty maintenance costs - corrosion, leaks, and safety upgrades - and the pipeline risks become a slow-draining liability.

By December, equity now outpacing debt, ownership had been split: TotalEnergies (62 percent), Uganda National Oil Company - UNOC (15 percent), Tanzania Petroleum Development Corporation - TPDC (15 percent), and China National Offshore Oil Corporation - CNOOC (8 percent).

Yet without a broader ecosystem to support the pipeline, it can’t be a sustainable regional empire.

Uganda’s lack of prior oil experience means no safety net to catch potential missteps.

Thus, we explore how Uganda can build an ecosystem to maximise EACOP’s benefits, ensuring it delivers more than just oil - it creates lasting value because without that, the risks could outweigh the rewards, leaving Uganda with more questions than answers.

Regulation

It is the backbone of any successful large-scale project, and for EACOP, the stakes are higher given its regional scope for it to have a comprehensive oil and gas ecosystem. Harmonisation is one area to look at - balancing innovation with responsibility to ensure sustainable growth while mitigating risks for all stakeholders.

Both Uganda and Tanzania have established regulatory bodies - Uganda Petroleum Authority (PAU) and Tanzania’s Energy and Water Utilities Regulatory Authority (EWURA) - that work in tandem under a unified framework.

This effort is guided by the Energy Charter Treaty, which sets the foundation through an Inter-Governmental Agreement (IGA) signed in 2017.

The IGA was followed by a host of agreements between Uganda, Tanzania, and EACOP, creating a structure that treats the pipeline as a single integrated project.

Ali Sekatawa, the PAU director of legal and corporate affairs, emphasises that this framework harmonises laws, standards, and regulations.

An IGA consultation committee was also established, allowing for dispute resolution and alignment at both ministerial and technical levels.

“This is the first project of its kind here, and while there’s historical precedence in the Tanzania-Zambia pipeline of the 1960s, EACOP’s complexity demanded structures to harmonise standards and align approvals across both countries,” Sekatawa says. 

This ensures, for instance, that a license condition in Uganda is consistent with one in Tanzania.

Yet, despite these efforts, the region’s alignment still feels fragile. EACOP was initially envisioned as a partnership between Uganda and Kenya, with a route connecting Hoima’s oilfields to Kenya’s Loichar and ultimately to Lamu Port.

The original plan sought to integrate South Sudan’s high-quality, low-cost oil reserves, which geologists say are more economically viable before incorporating Uganda and Kenya’s production.

But the plan unravelled due to politics, security concerns in northern Kenya, and the rocky terrain along that route.

Tanzania’s stability and the Tanga route became the safer, albeit longer, alternative.

Ghana’s experience with the West African Gas Pipeline Project (WAGP), is a precursor to the EACOP.

WAGP was intended to transport Nigerian gas across West Africa to Morocco, but challenges in sustainability and continuity truncated the project.

The project stopped in Ghana and countries such as Côte d’Ivoire, Sierra Leone, and Gambia didn’t benefit.

The irony here became stark in 2022 when Europe turned to Africa for energy following Russia’s gas supply cuts. The ecosystem was disintegrated.

Suddenly, the pipeline from Nigeria to Morocco gained renewed interest to supply gas to Europe.

But several African countries missed out on this gas, which is now playing a role as a transitional fuel that is cheaper and more efficient than crude oil for electricity production.

So, while regulation exists, it’s clear that regional alignment has a way to go. EACOP’s success hinges not just on technical frameworks but on navigating the complex political, economic, and ecological dynamics that define East Africa’s energy ambitions.

Riverson Oppong, the Society of Petroleum Engineers (SPE) director for Africa, offers a compelling view on the complexities and opportunities in building robust oil and gas ecosystems in Africa.

Drawing from Ghana’s experiences as a producing province, he breaks this down into two key facets: regional cooperation and the broader oil economy.

Oppong says that a thriving oil and gas ecosystem requires more than just extraction and production but good management of the entire value chain - from extraction to utilisation of products like oil, gas, or coal derivatives.

“Uganda is one of the first countries in Africa to grasp the importance of controlling the entire value chain,” he says.

The country is betting big on its oil and gas future, signing contracts with giants such as CNOOC and planning an oil refinery that will churn out more than just fuel. Think liquefied petroleum gas and other by-products like fertilizers.

While this is essential for a stable oil industry, its success depends significantly on Uganda’s ability to nurture a skilled workforce that can support the sector.

This brings us to a critical issue: local talent.

Local talent

Even with regional issues sorted and the value chain in hand, challenges remain. Who’s going to run the show? Countries such as Ghana and Nigeria have shown that relying on foreign expertise can leave their oil and gas sectors gasping for home-grown talent.

Ghana’s oil journey, for instance, started with significant reliance on Nigerian expertise, particularly in drilling.

Companies such as Schlumberger staffed 90 percent of their operations in Ghana with Nigerians. Today, the tables have turned, thanks to capacity-building initiatives.

“It starts with importing expertise but must evolve into training locals to take over,” Oppong says, underscoring the importance of knowledge transfer in regional partnerships.

Guillaume Dulout, the incoming managing director of EACOP, draws a vivid parallel between Nigeria's oil industry transformation and the path EACOP is charting.

In Nigeria, what started as an operation dominated by foreign experts evolved into one run almost entirely by skilled Nigerians, thanks to deliberate local capacity building driven by the Nigerian Content and Development Monitoring Board.

EACOP’s Academy has trained 140 Ugandans and Tanzanians for key roles, partnering with local institutions for specialised oil and gas training.

Foreign firms currently dominate big contracts such as logistics and pipeline construction, while local firms, despite making up 90 percent of the workforce in the oil and gas projects, are mostly in support services due to limited skills and funding.

Dulout says skilling nationals isn’t just a short-term effort - it’s an investment in expertise, regional collaboration, and future-proofing operations, highlighting that creating a self-sustaining ecosystem of local talent will be central to EACOP’s long-term success.

So far, $5.3b in contracts for the Tilenga, Kingfisher, and EACOP projects have been awarded, out of the $7.2b approved by PAU. Ugandan firms snagged $2.1b of that - about 40 percent - hitting the local content target.

It is a win, but the question remains; is that enough to prevent the industry from becoming a foreign takeover with a “Made in Uganda” label?

Turning local players into industry heavyweights takes more than just a seat at the table - it needs them to run the show.

Oil revenues

Imagine a thriving ecosystem, airtight regulations, and local talent steering the ship. Oil money starts rolling in. But that sweet cash could turn into a quicksand pit for sustainability.

Uganda’s oil dreams? A steady $1.5 to $2b a year for the next 25 years, starting in 2027 when oil production is expected. Engineers in the Albertine oilfields say it is all on track.

With production from Tilenga and Kingfisher oilfield projects set to generate significant returns, this is something that now calls for strict adherence to frameworks such as the Public Finance Management Act to ensure revenues are used effectively for long-term development.

Drawing on lessons from Ghana’s experience in resource revenue management, Sekatawa says there is need for a disciplined approach to avoid pitfalls and maximize national benefits.

Ghana’s Revenue Management Act, designed to control the allocation of petroleum revenue, serves as a benchmark.

But the challenge many countries such as this have faced is of over-reliance on oil revenue to fund national budgets.

One of them is Venezuela. It got an economic fall in 2016 when the oil price plunged from more than $100 per barrel in 2014 to under $30 per barrel in early 2016.

Thus, Oppong advises that Uganda should limit dependence on crude oil for budgetary support to avoid a situation like this aforementioned, recommending a threshold well below 50 percent, to shield the economy from volatile oil prices.

In fact, Bank of Uganda has previously asked government to think critically and diversify and strengthen traditional revenue sources such as agriculture because they will still be here when the oil wells dry up. 

Optical fibre

But beyond this, here is the bonus for the EACOP shareholders. The pipeline’s fiber optic line, built to spot leaks, could also be tapped by telecoms to bring internet to areas along its route.

The pipeline will feature 96 fiber optics, but plans to use only 72.

“There’s room for more,” Dulout says, hinting at the possibility of telecoms tapping into the unused 24 for internet services.

However, Dulout says the company is holding off on partnerships until construction is complete.

While he kept it vague, the idea isn’t new—Ghana has successfully monetized its fiber optics on gas pipelines, earning extra revenue by letting telecoms piggyback on the network.

When the wells run dry

This article has explored the various assets and strategies that can ensure sustainability of Uganda’s oil ecosystem. But what about the handover?

With 1.6 billion recoverable barrels expected to last 25 years, what happens when oil runs dry and the money runs out? 

UNOC is eyeing more reserves in the Kasurubani Contract Area, stretching 1,285 kilometres through Masindi, Hoima, and Buliisa. 

But let’s fast forward to that day when the pipeline goes quiet, and the oil wells are nothing more than rusting relics of past prosperity. What’s the plan then?

In some countries, the transition has been messy. Take the North Sea oil fields, where disputes over decommissioning costs between the UK government and oil companies led to costly delays and legal battles. 

Or Nigeria, where oil-rich communities have clashed with government over resource management and asset transfers, fuelling tension long after production stopped.

However, PAU documents reveal a solid plan - a transition clause that outlines asset transfers post-project. 

Sekatawa confirms this, noting that decommissioning is baked into the plan. 

“After five years of operation, companies must start depositing funds into a neutral account, shared by Uganda, Tanzania, and the company, to support final commissioning,” he says. 

The pipeline might open doors, but without a sustainable ecosystem, it risks becoming another costly gamble.

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