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 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,” Museveni while recognizing a historical fact that 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
President Samia Hassan Suluhu, the president of United Republic Of Tanzania who took over the presidency last month after the death of the popular John Pombe Magufulu- who also committed to the realization of the deal , said that 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 commitmen,” 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 Ministry of Energy Permanent Secretary Mr. Robert Kasande one of the original cadres sent to study and master the oil and gas sector in the late 80s and early 90s was the master of ceremonies and was recpognised by President Museveni together with many of his colleagues for the tremendous job they have done to develop Uganda’s nascent oil and gas sector .
Museveni said that these Ugandan technocrats were solid and very knowledgeable than many of the oil companies in the world.
Which agreements were signed
The agreements signed include Tariff and Transportation Agreement (TTA) between the pipeline company and the shippers of the crude oil through the pipeline. The two brother nations 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.
The 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.
Total E&P owns a majority stake of 72% in the pipeline, Uganda has 15%, CNOOC has 8% and Tanzania has 5% and the deal is structured in such away that after 25 years the investing companies will phase out from the joint venture and the hosting countries take full control of the assets .
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.
