We’ll hold foreign contractors to same standards – EACOP boss

It’s been two years since Final Investment Decision (FID); the Ukraine war hadn’t started, several key contracts had been awarded, and you were toiling with acquisition of project right of way. What milestones have you ticked off since?

I think when we last spoke two years ago, everything was ahead of us. Now, thankfully, some things are behind us, and we are in the middle of other things. For instance, in terms of land acquisition, I would say the acquisition is essentially done now apart from a bit of final legal paperwork. In terms of compensation, more than 95 percent of the 3,660 households have received their compensation. We built 177 replacement houses in Uganda, handed them all over to the households who were physically displaced.  We are now tidying up the last few remaining items which are either absentees, unknown parties, or some succession dispute or whatever. These are specific case by case issues that we are working to resolve. But we have land access where we need it now, which is rectangles for where we construct what we call the main camp and piping yard, where the construction workforce will be housed and where the pipe will be stored before laying. 

In terms of land acquisition, one would have thought that in Tanzania, given their uniform tenure system, you would have accomplished 100 percent success?

Out of almost 10,000 households, we have only 82 cases where there’s some sort of issue that is beyond our control; succession, absentees, unknown, moved away, all of those. And the system in Tanzania is a little bit similar to in Uganda where there is an escrow mechanism where we deposit the money so that when the person is identified the money is there for them. That said, the land tenure system is a bit more complicated in Uganda and we encountered five different types of land tenure in Uganda. There’s only one in Tanzania essentially. We conform to the International Financial Corporation (IFC) performance standard five for land acquisition in addition to respecting obviously the laws and regulations of the two countries.

Do you have a time frame when you expect to have ironed out all the pending issues?

I think we’ll have land access, full land access along the right of way in Quarter two this year, which is in time for when the project needs it. So we’ll have ironed out the issues without interrupting the project.

Then the other beefy side is the actual construction by China Petroleum Pipeline Engineering Co Ltd (CPPE)?

So the basic philosophy of the pipeline construction is that for every 100km we have what we call a Main Camp & Piping Yard (MCPY). So we create an area of about 300 by 500 meters, where the construction camp will be built and pipes will be stored. Today, the majority of these have all been graded, fenced, leveled and everything, and handed over now to the contractor, CPPE. And that means that CPPE, they’ll never be more than 50 km away from their work front, because for every 100 km there’s a camp. So that’s the sort of overall philosophy. And the CPP are right now mobilizing. Well, they started work on the pumping stations in Uganda and in Tanzania, and they’ll mobilise for pipeline installation later on in Quarter two this year. And CPP, it’s not like they’re building one pipe; they’ll build like 16 pipes each 100 km long. So they’ll have crews to build in parallel sections of the pipe, and it’s not just one construction site, there will be multiple construction sites. In that way we can build it within two years.

So is it accurate to say that construction started already?

So the pipes have arrived; we placed an order with a Chinese pipeline manufacturer. And the first three cargoes, each cargo being 100 km, are now in Tanzania. The first cargo arrived at the end of last year. The fourth cargo is sailing as we speak. So we’ve established a rhythm of 100 km of pipes per month, which is what we need to do. Typically, a ship arriving in Dar es Salaam you can see each pipe length is18 meters long. We have a fleet of 300 trucks with 18 meters long trailers. The green is an anti-corrosion coating. And then what we need to do is apply thermal insulation which will be done in a factory in Nzega in Tanzania.

What quantity of pipes do you expect?

We have a 1,443 km pipeline to construct. Like I say, each joint of pipe is 18meters long. So if you do the math, that’s about 80,000 plus joints of pipe. So each one needs to obviously be manufactured, shipped to and offloaded in Dar es Salaam, then taken right to the coating plant. Then the insulated pipe joints are delivered to the MCPY and handed over to the contractor CPPE.  They then move them along the right of way and then they start laying. We have six different wall thicknesses depending; if we’re crossing a wetland or more populated area or whatever the design code means you have to have some additional wall thickness, like a sort of safety factor. Also we have a barcode system, basically to be able to track every individual joint of pipe from the factory to its final laying place.

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How much is the pipe tender, some source say $167m?

I’m not going to give the specific value of the contract, but it’s not a huge percentage of the overall cost of the project.  Pipes are made out of steel which is a commodity. Pipes are basically 70 percent the cost of steel and 30 percent the cost of manufacturing the pipe. So let’s say the cost of manufacturing the pipe is fairly constant, but the underlying commodity can move up and down. For instance, there was a spike immediately after Russia’s invasion of Ukraine, and we delayed the purchase a little bit, and the market calmed down. But I mean, steel prices are coming back down now close to where they were before.

Are there any other ways the war has impacted the supply chains other than the pipeline, the pipe supplies?

There was the surge of inflation that I think affected everybody that started post Covid-19. Prior to that there was a period of global price stability and then some global inflation, but this seems to all be coming down again now. When we buy diesel for the project, it costs more than it would have done two years ago or three years ago. But this is the same for you or me. Some commodities, like shipping container rates went very high for a short period, but they now come right down again. And now, for example because of problems shipping through the Gulf there are some fluctuations.

Generally, how are things shaping up?

So, I mean, everything’s now underway. You can now see the mobilisation on the ground and then behind the scenes, there’s a lot of equipment now starting to arrive in the country, particularly in Tanzania; valves, generators, pumps, the line pipe. A lot more will arrive between now and the end of the year. You saw the tank foundations being built at Tanga, so you can imagine the steel tank walls have to be rolled, as the wall of the tank is made from steel plate that’s curved, so that’ll start to arrive as well.. So all of that is moving around the world and coming into the country.

The other thing is the fibre-optic cable and now there’s talk of connecting to the national fibre?

Around the world there are millions of kilometers of pipeline, but EACOP will have a fiber optic cable running along the top of it. That’s first and foremost for our own needs. We have six pumping stations, and they all need to work in sync. You can’t have one going faster than the other one. So we need to know what’s happening along the whole pipeline. So the fiber optic is our way to move data and information, and control the whole system. We have a control room at either end, and so that can control the flow rate all through the pipe. So that’s the first purpose of the fiber optic cable, then.  The second purpose is we can use it for monitoring of the pipeline. Nowadays you can detect physical properties with fiber. So we can detect temperature.  If you like, a monitoring system, and we can complement the temperature to also detect vibrations using the fiber. We have a standard 96 cores cable, there are 24 that are surplus to our requirements and we have said we’ll make it available to the two governments, the telecom authorities.

When CPPE was announced as the pipe builder, concerns abounded of how Chinese contractors are ambivalent to standards and human rights. This has fed into the #StopEACOP campaign?

So, first of all, as EACOP, we commit to follow the highest international standards and that includes our Contractors. So the IFC performance standards, which in particular impact on land acquisition, environment and biodiversity, but also international standards on human rights, including worker health, safety, workers voice, all these things. Now, it doesn’t mean that everything’s perfect every day. So sometimes we detect an anomaly that we work to correct and improve with the contractor. But it doesn’t matter whether you’re Chinese, European or Ugandan, our contracts have the same requirements and we make sure that we supervise and assist such that our requirements are fulfilled.

Which component is taking the most money of the $4b?

There’s a land acquisition, there’s the cost of running offices and staffing them etc. But the vast majority is the project itself. So we have a suite of ten or twelve contracts, plus a lot of procurement. And the vast majority of the spend is on engineering, designing, procuring and constructing the whole pipeline system. Not just the pipeline itself, but all the electrical systems, all the pumping systems, the terminal and jetty, the valves stations, all the bits and pieces that go into a pipeline. So 80 percent plus of the cost is directly the cost of the project itself.

Any challenges thus far?

Well, you know, bad rainy season and normal stuff. I mean, there’s always stuff going on. But the job of a project manager is to do what you need to do, to build what we need to build.  And you have to expect to handle some events in the course of four years here, like you said. That’s part and parcel of what it is. It’s never going to be totally plain sailing. Those are challenges.

And encumbrances?

I mean, like I say, it’s the first time anybody’s ever built a project like this in East Africa, so it’s a large human endeavor over multiple years. A road can get flooded or washed away, it takes time to mobilise skilled workforce, sometimes longer than we initially planned for.

So what are some of the skills that you’ve known being difficult to find locally?

I guess the obvious one is to weld hydrocarbon pipelines, it’s not like welding a metal in your garage. Typically you need two to three years’ experience of doing that. So we’re training some nationals, but at the same time, in order to get the job done we need to bring in skilled people. Actually a lot of the welding on the main pipeline is machines.

What are the most on-demand skill sets?

Multiple skills: electricians, instrumentation, civil engineering, mechanical piping, machinery operators, there’s a huge number of skills required.

Are you impressed with the supply that the country has?

Honestly, I think that we are providing many opportunities to nationals in both countries. I believe we can leave a positive legacy, leaving nationals with an enhanced skill set. I mean, the nature of a project is that people come onto the project, they work for the duration of the project, and then they leave, because once it’s built, you don’t need so many people.

So, that’s why, typically, you mobilise, we try and look simultaneously, locally, regionally, and internationally. So, it’s a dynamic picture.

With the sequence of events upstream, do you see EACOP happening first to catch up? We also have elections campaigns starting soon.

I mean, you know, the construction and then the oil production will go on over a 25-30 year period in both Uganda and Tanzania. There’ll be elections every four to five years, that’s the part and parcel of, you know, of life. But we are not building anything for an election. We’re an industrial project.

Lastly, the stop EACOP campaign seems not to be going away?

We have a very clear commitment to international standards. We have, in our organisation, many people working to make sure that those standards are then applied and followed across all of our sites. And we have, also on our website a document by a third party who’s done due diligence, following us for two years against IFC performance standards; so we try to be as transparent in what our ambition is,  how we want to work, and we try to be transparent in what our results are.