The two governments of Uganda and Tanzania have Friday signed the intergovernmental agreement for the pipeline that will transport crude oil from the Albertine region to the port of Tanga in Tanzania.
With the length of 1,445 kilometers, the 24 inch diameter pipeline is expected to be the longest electrically heated pipeline in the world.
The agreement was signed at Kampala Serena Hotel between Uganda’s Minister of Energy and Mineral Development Eng.
Irene Muloni and Tanzania’s Minister of Constitutional and Legal Affairs Palamagamba John Kabudi at an event witnessed by several dignitaries in government and the private sector.
In April 2016, Uganda chose the Tanzania route over Kenya for reasons relating to security and cost of transportation (at USD 12.2 per barrel). With an ambitious target of producing its first oil in 2020, Uganda will rely on the pipeline for export to the international market.
An estimated USD 3.5 billion will be invested in the pipeline construction which is slated to commenced in 2019.
Friday’s ceremony is considered a significant development that will make way for other project agreements including the host government agreements, shareholders’ agreements and financing agreements.
Minister Muloni expressed excitement towards the agreement which she said was a major milestone. Representatives from both governments however remained tight lipped on the key elements agreed upon, saying it was premature to reveal details. The agreement which is legally binding now awaits ratification by Parliaments of both states.
She however said that the government of Tanzania provided incentives including waivers in taxes and transit charges supplemented by the land regime which favors acquisition of land for the pipeline corridor.
Tanzania’s Minister of Constitutional & Legal Affairs Palamagamba John Kabudi speaks after the signing of the crude oil pipeline agreement
In his remarks, Tanzania’s Minister for Constitutional and Legal Affairs, Palamagamba Kabudi gave reassure that Uganda’s oil pipeline will be safeguarded through the route given Tanzania’s previous experience in supervising and managing Zambia’s oil pipeline under the Tazama project.
“To the project partners, you should know that you are dealing with people (Tanzania) who are experienced in handling security for such strategic projects,” he said.
Though he admitted that the Indian Ocean bears rough tides due to the monsoon winds, he added that “the port of Tanga is protected by the islands of Pemba and Unguja. However, we are aware that it needs to be further improved to accommodate the Uganda oil pipeline project.”
To that effect, Palamagamba said that Tanzania is currently carrying out Front End Engineering Design (FEED) studies set to be completed by August 2017 to upgrade the port so as to meet the required standards. He said construction will begin in December this year.
He noted that the pipeline project is an opportunity for both countries to increase foreign direct investment, job creation, new technologies and tax revenue.
“Implementation will be a a success. Tanzania has no hesitation whatsoever to delay this. It is 2020, it’s going to be 2020,” the Minister said.
While many have casted skepticism on Uganda’s chances to meet its 2020 target for oil production given the humongous work ahead, Minister Muloni says that it is likely that the two governments will segment different contractors so that construction works on the pipeline are done concurrently.
Currently, the FEED studies for the upstream development are in progress in the Albertine region and will be completed in the next three months, according to Muloni.
It is these studies that will evaluate the environmental and social risks, carry out site investigations for construction and investment cost estimates for the project before the three oil companies Tullow Oil, CNOOC and TOTAL E & P make their final investment decision in December 2017.