Landlocked Uganda finally decides on Hoima-Tanga Route

The much anticipated outcome of the past weekend’s meeting with the three East African leaders is finally out. The decision was made at the 13th Northern Corridor Integration Projects (NCIP) summit in Kampala, which was also attended by President Paul Kagame and Uhuru Kenyatta of Rwanda and Kenya, respectively. Landlocked Uganda has finally decided to partner with Tanzania to transport its oil from western Hoima district—home to some 1.7 billion barrels of oil, one of East Africa’s largest reserves to the Indian Ocean for trade. The 1,400 kilometre pipeline will run from Hoima (south of lake Victoria to Tanzania’s port of Tanga and is expected to be completed by mid-2020.

The decision is a major blow to Kenya who had fiercely competed for the project and had made every attempt to entice Uganda to choose the northern route. However, Tanzania seems to have offered a better deal for Uganda, some of which include, waived taxes and transit charges on the oil being transported. Not only that, Tanzania will share the construction costs with Uganda which is deemed to become one of Africa’s newest oil exporting countries.

The bout was not only just between the East African countries, but some of the world’s largest oil companies, as well. France’s Total, China’s CNOOC, and the UK’s Tullow share the rights to explore Uganda’s oil reserves. The Tanzania route was Total’s favourite whilst Tullow favoured the Kenyan route where it has also made significant discoveries. The Kenyan route (Lokichar-Lamu) would have been 1500 kilometres and would have costed an extra $1 billion.

Uganda felt the Tanzanian route was cheaper and easier at a construction cost of $4 billion and pipeline distance of 1400 kilometres in comparison to the Kenyan route. Furthermore, the security concerns raised by Uganda over Kenya’s northern route poured water on Kenya’s chances. The pipeline was a key part of Kenya’s plan to revitalize Turkana ( its impoverished north) by building a $26 billion transport and infrastructure corridor, the Lamu Port Southern Sudan-Ethiopia Transport corridor, better known as the LAPSSET project.

Even though Kenya lost the bid to Tanzania, it insists that it will continue with construction of its own pipeline linking 600 million barrels of oil in the Lokichar basin (in the northwestern Turkana County) to the coastal city of Lamu, home to a future port. The hope is that eventually South Sudan and Ethiopia will also use the Lamu port, although some have some rumours that South Sudan and Ethiopia might pull out too are rife.

Some analyst perceive that this might not be an economically viable decision for Kenya as it might not get much from its oil and even less per barrel if it were to build its own pipeline.

The Minister for Energy and Minerals, Professor Sospeter Muhongo, said in a statement “It will be cheaper and easier for these countries to use the pipeline compared to any other port in the East Africa Region, the Tanzanian route is cost-effective, reliable and secure.”

The pipeline is thought that it will be of benefit not only to Uganda and Tanzania but others countries within the region such as Kenya, South Sudan, Rwanda, Burundi and the Democratic Republic of Congo (DRC).

The three oil companies, Total, Tullow and CNOOC which have made discoveries in Uganda also plan to construct an oil refinery to process 60,000 barrels per day to cater for demand of petroleum products in East Africa while between 200,000 and 600,000 barrels will be transported in crude form through the pipelines for exports outside the EAC.

It is only a matter of time to see what Kenya decides on which route is better to follow in the short-term and in the long term,

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-Source:All AfricaQuartz Africa

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