Pipeline meeting called off over Magufuli death

Monday March 22 2021
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President Museveni (left)and his Tanzania counterpart John Pombe Magufuli (RIP) sign a pact for the East Africa Crude Oil Pipeline (EACOP) project in Tanzania in September last year. PHOTO | FILE

By Frederic Musisi

The high-profile meeting previously scheduled for today to sign off the remaining key agreements for commercialisation of the proposed East African Crude Oil Pipeline (EACOP) has been deferred to allow the mourning of fallen Tanzanian President John Pombe Magufuli, sources have revealed.
Magufuli, 61, died on Wednesday last week  due to heart complications.

During the meeting, Uganda, Tanzania and Total SA - the parent company of Total E&P, the lead developer of the pipeline - were slated to sign the shareholders, tariff, and transportation agreements, respectively for EACOP.

The shareholders agreement details the structure of the 1,443km pipeline from Hoima in mid-western Uganda to Tanzania’s Indian Ocean port of Tanga.
 
Total E&P owns majority shares in the project of 72 per cent, followed by Uganda through Uganda National Oil Company (Unoc) with 15 per cent, Chinese oil company—Cnooc with eight per cent, and Tanzania through its national oil company, TPDC, with five per cent.

Uganda’s 15 per cent stake is in sync with the 15 per cent stake in the production licences for each of the oil fields operated by Total E&P and Cnooc.

The tariff agreement details the economics of fees for transportation of crude oil from Hoima through Tanga port, while the transportation agreement deals with shipment of the oil from Tanga to the international market.

The initialing of the three agreements is expected to pave way for Final Investment Decision (FID), when Total E&P and Cnooc are expected to announce capital—at least $10b (Shs36 trillion) to kick-start the next development phase leading to commercial oil production, tentatively by 2025; $6.7b (about Shs24 trillion) for developing the oil fields—Tilenga fields in Nwoya/Buliisa districts and Kingfisher, and $3.8b (Shs13.8 trillion) for developing the EACOP.

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The postponement of today’s meeting is to some extent a blessing in disguise for Uganda to quickly mobilise $130m (Shs487b) as initial financial commitment to EACOP.

The Ministry of Finance last week hurriedly submitted a request for supplementary budget to Parliament to borrow the money from the domestic market but faced a hard time during the back-to-back appearances before the Budget and National Economy committees, respectively, to justify the “quick request” for a project whose negotiation has been on for a long time.

The Minister of Energy, Ms Goretti Kitutu, and Unoc management led by the chief executive officer, Ms Proscovia Nabbanja, are today expected to discuss with MPs on the committee on National Economy to approve the loan request.
The MPs last week, however, requested for copies of all agreements relating to the pipeline.

The $130m includes $70m (Shs259b) as Uganda’s initial financial commitment and $60m (Shs222b) to offset expenses previously spent by Total E&P in pre-project construction activities. Uganda’s 15 per cent equity stake in EACOP translates into $233m (Shs849b).

Construction of the pipeline is tentatively expected to commence later this year if FID is closed by early next month.

UNOC
Uganda National Oil Company, the statutory body mandated to manage the country’s commercial interests in the oil sector, requires another  $480m (Shs1.7trillion) to finance Uganda’s stake in the proposed 60,000 barrels-per-day oil refinery, and $71.4m (Shs261b) in the proposed storage terminal for the refined oil products.

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