UGANDA – Uganda and Total have reached an agreement that will bring the oil major and its partners closer to starting construction of a crude pipeline to neighboring Tanzania.
The development is a major boost for Uganda’s oil industry which has not been able to achieve commercial production since oil discoveries were made 14 years ago partly because of a lack of infrastructure, such as an export pipeline.
Uganda has proven oil reserves exceeding 6.5 billion barrels, of which about 2.2 billion barrels are recoverable.
The country plans to build a refinery in the Western Region to meet local and regional demand, with the rest exported via pipeline to the Indian Ocean coast.
The 1,445-km (900-mile) East African Crude Oil Pipeline, costing $3.5 billion, would pass through neighboring Tanzania to the Indian Ocean port of Tanga.
Once completed, the East African Crude Oil Pipeline will be the longest heated crude oil pipeline in the world.
Total said it had reached an agreement with Uganda protecting its rights and obligations in the pipeline’s construction and operation – known as the host government agreement (HGA).
“We have today reached major milestones which pave the way to the Final Investment Decision in the coming months. We now look forward to concluding a similar HGA with Tanzania and to completing the tendering process for all major engineering, procurement and construction contracts.”
Pierre Jessua- Managing Director of Total E&P Uganda
Uganda previously agreed to build a joint Uganda–Kenya Crude Oil Pipeline to the Kenyan port of Lamu.
Concerns regarding security and cost, however, motivated parallel negotiations with Tanzania regarding a shorter and safer route to Port Tanga, with the support of the French petroleum conglomerate Total SA.
Total said a meeting between President Yoweri Museveni and its Chief Executive Officer Patrick Pouyanné also agreed to conditions allowing Uganda National Oil Company to join the project.
Total is the major shareholder in Uganda’s oil fields after agreeing in April to buy Tullow Oil’s entire stake in jointly-held onshore fields in Uganda for $575 million.
Tullow said this week it was confident of finalising the sale in fourth quarter of this year. The other partner in the 230,000 barrel-per-day project is China’s CNOOC.
The government of Uganda said last year once pipeline construction begins, it would take 2-1/2 to three years to complete.
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