Total remains firm on decision for Tanga Route amidst oil pipeline triangle between Kenya, Uganda and Tanzania

Total E&P Uganda has confirmed its commitment to construct the $4 billion crude oil pipeline through Tanga regardless of ongoing discussions between Kenya and Uganda to have it pass through the Kenyan route. The affirmation was made by Totals general manager Adewale Fayemi who said “As a company, our position remains that we are going through Tanga. I understand there are issues being discussed but our position remains the same,” This was said at the two-day East Africa Oil and Gas conference in Tanzania.
Mr. Fayemi added that all available options have been carefully considered and the firm is more interested in the Tanga route, which it considered cheaper for oil production.
Total is the main financier of the crude oil operations in Uganda despite being in partnership with Tullow and China National Offshore Oil Companies (CNOOC) and its decision carries more weight. The three firms are forecasting production of an estimated 6.5 billion barrels of Uganda’s crude oil by 2018.
There are two possible routes that could be explored by Kenya and Uganda in construction of the crude oil pipeline. These are the southern route through Nairobi from Uganda to Mombasa and the northern one through Hoima, Lokichar Lamu. The other alternative is the Uganda Tanzania route from the Albertine basin in Western Uganda to Tanga.
Both Kenya and Tanzania boast of established ports, although Kenya is banking on its longstanding relationship with Uganda in terms of transporting goods to the landlocked country. In addition, Tullow which holds a major stake in the Kenyan oil fields favours the Hoima-Lokichar-Lamu route. And the positive results observed in Kerio valley give more reason for Kenya to clamour for the pipeline to pass through this route. Tanzania on the other hand boasts that the Tanga is closer to the Uganda oilfields than Lamu. It also holds that the construction would be cheaper along the route because of the gentle terrain compared with the escarpments in Kenya. Furthermore, besides security concerns, Uganda is concerned with the LAPSSET project falling behind schedule. This gives Tanzania an advantage because the Tanga port is already built.
However, Kenya’s Energy Principal Secretary, Joseph Njoroge believed that if all fails, Kenya could go it alone on the crude oil pipeline; “We will build an oil pipeline, whether we are together with the Ugandans or not.”
Total’s stance on the issue comes as Kenya’s President Uhuru Kenyatta considers negotiating for the Lamu route through his host President François Hollande during his upcoming trip to France this month.
At the moment, Kenyan and Ugandan officials are touring Lamu and Lokichar, following a decision by President Kenyatta and Uganda’s Yoweri Museveni to have all possible routes reviewed and harmonised. The team is examining the terrain, technical and economic aspects of three possible routes through Tanga in Tanzania, Lamu or Mombasa port in Kenya.
Total’s current stand on the pipeline could water down a meeting by Presidents Kenyatta and Museveni set for the coming week given that total is the major financier in Uganda’s crude oil operations.
Tanzania has this week joined Kenya and Uganda in the search for a least cost option for a pipeline that will take crude oil from East Africa to export markets and allow its natural gas to be exported to neighbouring countries. It is participating in the discussions as this is also a strategic business opportunity for Tanzania. Kenya’s Energy and Petroleum Principal Secretary Andrew Kamau said in a statement “Both Uganda and Kenya are in need of gas and the gas through the two countries from Tanzania will be beneficial. However this will depend on Tanzania’s decision,”
The fourth alternative that can be taken into consideration would include Kenya abandoning the quest for a pipeline to Lamu and instead linking the Turkana oil fields to Hoima in Uganda from where crude oil will flow into the Uganda pipeline enroute to Tanga. This alternative however will be a major blow to Kenya’s LAPSSET project.
Total’s affirmation comes after an announcement by Tanzania Petroleum Development Corporation (TPDC) Executive Director James Mataragio, that France had readied $4 billion to begin construction of the pipeline by August and have it completed in two years.
Kenya ‘s Cabinet secretary for Energy and Petroleum responded to Total, noting that Kenya’s concerns on the crude oil pipeline would be addressed within the EAC.
When all’s said and done the decision on the crude oil pipeline route is key for Tullow Oil Plc, Africa Oil Corporation and Maersk Oil to make final investment decisions (FID) on South Lokichar basin.
According to Global Data’s upstream analyst Jonathan Markham even though the discoveries in the two countries are above the volume threshold for commercial development without an economical export route, the inland discoveries will remain commercially impracticable at today’s prices.
The Capex on upstream projects over the next 10 years is forecasted to be around $7 billion in Uganda and $3 billion in Kenya once exploration firms are allowed to move to production.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s