Oil pipeline company starts work next month

Tuesday August 03 2021
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EACOP general manager, Mr Martin Tiffen. PHOTO/COURTESY

By Frederic Musisi

The holding company to fast track development of the proposed East African Crude Oil Pipeline (EACOP) is expected to come into force by September while construction is scheduled to kick off in the second half of 2022, officials have said.
The EACOP general manager, Mr Martin Tiffen told Daily Monitor in an interview that once active, the company will take over all pipeline related operations from the French oil firm TotalEnergies EP, formerly Total E&P, which has been running the show since 2016 when Uganda settled for the southern route through Tanzania as “least cost” to transport oil to the international market.
“First and foremost, ‘up and running’ implies having the new company, with its management, staff, offices, IT systems, bank accounts, etc, everything that EACOP project needs in order to function. That’s one key part of the puzzle,” Mr Tiffen said.
The EACOP holding company owners as stencilled in Shareholders Agreement signed on April 11 at State House, Entebbe, are; Uganda National Oil Company (Unoc) with 15 per cent, Total Holdings International B.V. with 62 per cent, Tanzania through its national oil company, TPDC, with 15 per cent, and China’s Cnooc with 8 per cent.
The pipeline runs 1,443km from Hoima in mid-western Uganda to Chongleani terminal, at Tanga port at the Indian Ocean in Tanzania.  The project cost is estimated at $3.55b (Shs13 trillion).
Mr Tiffen revealed that they are currently fast tracking land acquisition both in Tanzania—where the process is a lot faster as land belongs to government—and in Uganda, where the process was imperilled by the back to back lockdowns to contain spread of Covid-19.
“Nonetheless,..[in Uganda] we’re now in what’s called the disclosure process of both the Resettlement Action Plan, and the valuations; we’re about 1/3 way through, which should allow us to start the actual compensation process later this year,” he added.
The Ugandan section of the pipeline runs through 179 villages in 10 districts—Hoima, Kikuube, Kakumiro, Kyankwanzi, Mubende, Gomba, Ssembabule, Lwengo, Kyotera, and Rakai.
In April, Uganda, Tanzania, TotalEnergies, and Cnooc, signed off the key project development agreements including the Shareholders Agreement, and Tariff and Transportation Agreement.
TotEnergies, Cnooc and Uganda also signed the Host Government Agreement (HGA), which lays basis for development of the pipeline, and later on May 12. Tanzania signed its version of HGA with the two oil companies.
Mr Tifften, however, indicated that “these agreements require some additional work in order to be fully implemented, and that’s what we’re working on as we speak with both governments and the other shareholders. An example of this is what we call enabling legislation which is one of the key requirements for implementation.” See interview excerpts below
Since signing of the agreements on April 11, and later in May. What’s the update?
EACOP is an integral part of a co-development of three projects, which are EACOP itself, together with Tilenga and Kingfisher. It is Tilenga and Kingfisher that will drill the wells and process the oil to export quality.  
Part of the production will be made available to the refinery project, and the rest of the daily production will be sent via EACOP to be sold into world markets.
Physically EACOP is 80 per cent in Tanzania in terms of length, and 20 per cent in Uganda.  This requires the project to have a legal and commercial framework across the two countries.  
These agreements require some additional work in order to be fully implemented.
Our current timetable is to have the EACOP company fully up and running by September.
Since 2016, it’s been TotalEnergies taking the lead on EACOP project, and whilst we continue to do that, we want the EACOP Company itself, in which all the pipeline shareholders have a stake, to come into force; once EACOP Company is fully constituted and operational it will take the lead on the project.
When you say ‘up and running’ by September does it include construction?
One key part of the puzzle is having the company operational. The second key activity is land acquisition.  
We have pledged to undertake this exercise whilst respecting both Ugandan and Tanzanian law, and also international standards.  
I should clarify that EACOP project will never own the land it traverses nor that which houses all its other facilities; this land will be leased from the two governments.  
To acquire this land, there is a two-step process; mapping, valuation & preparation followed by the actual compensation & acquisition.
In Tanzania, we’ve been progressing because the first land that the project needs is for the coating plant, which is located in the Nzega District in Tabora region, Tanzania.  
This is called Priority Area land, and in June, we started signing the compensation agreements with the Project Affected Persons.
If all goes as planned, we should be in position to start the preparation civil works activities for the coating plant in Tanzania by about September, this year.
So, when do actual works start; you said earlier this year which seems improbable?
The common objective for both the Upstream and EACOP is that we should be ready for first oil export in Q1 2025.  That is three and a half years from now.  By end of this year I think the most visible thing in Uganda will be the land acquisition.
Similarly, to the Tilenga project, we are also finalising what we call the level one contracts for EACOP.  These cover the key procurement items as well as the construction contracts for the pipeline, pumping stations and terminal. Therefore, in the next few weeks, we’ll be concluding that with all our shareholders.
The first thing to be done is to buy the line pipe that will be manufactured in various pipe mills around the world.  
As this is a manufacturing process, it will take a bit of time, let’s say six months before the first pipe is ready to be shipped to Dar-es-Salaam, and moved to the coating plant.  
Coating should start in the first half of 2022 and once we’ve built up a stock of say 300 kilometres of coated pipe, we will then deliver that to various piping yards that we have along the right of way in both Uganda and Tanzania.
In parallel with the conclusion of the land acquisition, when we have land access, and the coated or insulated pipe in sufficient quantities, then construction activities like the real pipe laying will begin in both countries around the second half of next year, 2022.
Besides the land acquisition which is never short of drama in Uganda, what would you say are the other lingering challenges, notwithstanding Covid?
Our target is to have EACOP fully up and running in September. And that’s what we’re focusing on.
Once EACOP is a legal entity, a separate Company, and with shareholders, its mandate will be to execute the project.  
There are a lot of moving parts, and our job is to make sure that all these parts move in a coordinated manner.
At the signing of agreements on April 11 we expected to hear closure or final investment decision, announcing big monies and where its coming from, but that didn’t happen.
Recently we have seen reports of large banks dissociating from the project especially over carbon concerns.
EACOP project funding has always been based on a two-pronged concept; firstly from the shareholders themselves bringing what is called ‘equity’ in proportion to their shareholding and secondly, external lending to the project by banks.
So, it is a mixed financing strategy we are pursuing. Despite everything you read, and without going into details, we are confident that we can execute all our plans, including the financing plans for this project.
So, you are saying it’s premature to talk about financing?
No, what am saying is that we have been running a process on financing intensively and we remain confident that we’ll obtain the required financing. Thus it is not a stumbling block in in terms of project execution.
Are there things you expected the government to be doing or have done by now?
If you’re developing the natural resources of a country, and transporting those resources across that country, and then across another, our biggest interface, or rather main ‘customers’ if you will, are the Host Governments, their Ministries and Agencies.
So we are in a continuous dialogue with them about what we are doing, what they require from us and vice versa.
Our workings together are governed by the Host Government Agreements which set out some of the things they have to do for us (for instance authorisations), and equally some things we have to do for them.
So, going forward, how committed are you to these timelines?
You have heard the two Presidents of Uganda and Tanzania and the TotalEnergies Chairman & CEO speaking and that is the commitment.

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