President Yoweri Museveni of Uganda and his counterpart President Samia
Suhulu Hassan of Tanzania were joined by
the two oil companies of Total E&P, and China’s CNOOC to finally sign the East African Crude Oil Pipeline in
the Capital Kampala . The deal will ensure oil production begins and is
transported in the longest heated pipeline in the world to the coast in Tanga by 2025.
The historic signing ceremony at
State House, Entebbe which was held on
the day when fighting forces from Tanzania liberated Uganda from the brutal
regime of dictator Idi Amin Dada 42 years ago . President Yoweri Kaguta
Museveni, said that he chose to work with Tanzania because of its historical
contribution towards Uganda.
“I originally preferred an oil refinery only
because of the high demand in the East African region that imports a lot to
serve their markets. The oil companies were biased for crude oil exports and a
pipeline. The compromise was we have both,” he said.
Museveni
said Tanzania helped Uganda to sort out the political mess that had been
created by past leaders.
On why he chose April 11 as the new date to
sign the agreement, Museveni said it was the same day in 1979 when the
Tanzanian army launched the assault on Kampala and deposed President Idi Amin.
“I thank President Suluhu for accepting my
sentimental request for the signing to be held today, April 11. It is today, 42
year ago, that Lt. Col Oyite Ojok announced the Tanzania army TPDF and
UNLA victory over Idi Amin,” Museveni said
For her part, Samia Hassan Suluhu, the
president of United Republic Of Tanzania who assumed the presidency last
month after the death of John Pombe Magufulu, the pipeline will go a long away
in cementing the relationship that her country has with Uganda.
She said
in the region grappling with unemployment, the pipeline will create a number of
jobs especially for the young people.
“I encourage all countries in the region to
continue building infrastructure and projects that will spur development,”
Suluhu said.
Suluhu also thanked Uganda for agreeing to
postpone the signing of the agreement from the original date of March 22 to
today in honor of Magufuli who she talked about as having been very
enthusiastic about the project.
“This kind of gesture portrays a true
definition of partnership. Postponing this event was the honor of his commitment…,”
Suluhu said.
The Chairman and Chief Executive Officer of
Fran Oil Giant Total , Patrick Pouyanne, thanked President Museveni for
his unwavering commitment to the oil project.
He said signing the agreement is a historical
milestone in the journey of the oil industry not only for Uganda and Tanzania
and for the whole of the East African region.
“It’s a very large project one of the largest
to be developed on this content. Its more than $10billion dollars. It hasn’t
been possible without your commitment. This is the beginning of the journey
that will take four years for the oil to start flowing from Uganda to
Tanzania,” Pouyanne said.
Energy Minister
Mary Goretti Kitutu was joined by her Tanzanian counterpart and Total E&P vice president for Africa to
sign a number of agreements relating to the pipeline .
The agreements
The deals signed on Sunday afternoon
included the Tariff and Transportation Agreement (TTA) between the pipeline
company and the shippers of the crude oil through the pipeline.
The two governments and oil firms
also signed the Host Government Agreement for the Republic of Uganda and the
shareholding Agreement (SHA) for shareholders to the EACOP Company.
Shareholders in the East African
Oil Pipeline(EACOP) include the Uganda National Oil Company (UNOC)on behalf of
the Ugandan government, the Tanzania Petroleum Development Corporation (TPDC),
Total E&P, and CNOOC.
With French company French Total
E&P owning a majority stake of 72% in the pipeline, Uganda has 15% whereas
CNOOC has 8% and Tanzania has 5%.
Pipeline
The East African Crude Oil
Pipeline is a 1,445-kilometer-long pipeline from the oil wells in western
Uganda in Hoima district to Tanzania’s seaport of Tanga.
The pipeline will cover 296km in
Uganda passing through Hoima, Kyankwanzi, Mubende, Gomba, Kyotera, Lwengo,
Ssembabule, Rakai, and Kikuube and 1443km in Tanzania through the regions of
Kagera, Gieta, Shinyanga, Tabora, Singida, Dodoma, Manyara, and Tanga.
The $3.5 billion oil pipeline
project is the longest electrically heated pipeline in the world and it is
heated because Uganda’s oil is waxy.
Uganda has about 1.7 billion barrels
of recoverable oil discovered in the Albertine Graben on the border between
Uganda and DR Congo at the Kingfisher and Tilenga fields.
How Uganda’s nascent Automotive Industry championed by Uganda’s
flagship Kiira Motors will benefit
Uganda’s
automotive industry captain -Kiira Motors Corporation (KMC) whose Vehicle Plant
at the Jinja Industrial And Business Park is set to be completed in the next
three months is set to be one of the major beneficiaries of Uganda Oil and gas
sector .
This
is because after crude oil is removed from the ground, it is sent to a refinery
where different parts of the crude oil are separated into useable petroleum
products. These petroleum products include plastics, distillates such as diesel
fuel and heating oil all by-products that can be used in the building and
powering of vehicles made in Uganda.
Kiira
Motors Corporation led by Prof. Sandy Stevens Tickodri -the
Executive Chairman and Mr. Paul Isaac Musasizi- the CEO are set to
produce at least 22 vehicles a day and 5,000 units a year – at their start-up
facility in Jinja .
The
company and its partners plan to produce and deploy 1,030 Buses by end of
2021, 50 of which will be electric. The initiative is aimed at modernizing
public transport in the urban centers in Uganda and beyond, while building the
indigenous motor vehicle industry through technology transfer and localization
of auto parts manufacturing.
Background
Last
year , France’s Petroleum giant Total acquired Tullow’s entire interests
at an estimated USD 5,775M with an initial payment of USD 500M at closing
and USD 75M when the partners take the Final Investment Decision (FID) to
launch the project which is dear to Yoweri Museveni Uganda’s
longest-serving president.
In
addition, conditional payments will be made to Tullow linked to production and
oil price, which will be triggered when Brent prices are above USD62 a barrel.
Under
the terms of the deal, Total will acquire all of Tullow’s existing
33.3% stake in each of the Lake Albert project licences, EAI ,EAIA, EA2 and
EA3A plus the proposed East African Crude Oil Pipeline (EACOP)
system. The transaction , however, is subject to the approval of
Tullow’s shareholders, to customary regulatory and government approvals
and to CNOOC’s right to exercise pre-emption on 50% of the deal.
Uganda’s
oil production had previously been bogged down by disputes over the tax
revenues accruing to the Uganda government leading to legal battles in the High
Courts of Uganda and the United Kingdom. Industry experts say that Uganda is
likely to get far much less revenue in taxes on the current deal and the
plummeting oil prices due to the Covid-19 pandemic cannot help matters either.
Oil prices have gone negative
For
the first time ever, the price of U.S. crude oil went in the negatives
due to the global-novel Covid 19 pandemic that obliterated demand for
energy. As the pandemic wrecked havoc and brought down global economies –
traders and producers paid as much as $40 for the privilege of parting with a barrel
of oil.
Plummeting
prices – set off a mad dash to store oil, as producers hoped to weather the
storm and sell their supply after the pandemic. But storage space is finite and
growing ever more expensive as buyers disappear from energy markets.
With
many people being vaccinated against the deadly pandemic it is hoped that
Uganda’s oil sector will benefit as the global oil markets bounce back.
msserwanga@gmail.com
