UGANDA ‘S PRESIDENT MUSEVENI AND TANZANIA’S SAMIA SULUHU HASSAN SET TO SIGN LANDMARK OIL PIPELINE DEAL AS VEHICLE PRODUCTION COMPANIES PREPARE TO BENEFIT

Uganda’s President Yoweri Museveni will this morning  host his  Tanzanian counterpart President, Samia Suluhu Hassan to among others ,sign the long awaited  oil pipeline deal which her predecessor the late John Pombe Magufuli worked so hard to realise .

The two heads’ of state meeting at  State House Entebbe-  will also  see the two principals witness the signing of the  Final Investment Decision  (FID)which will in effect kick-start the construction of the   crude oil pipeline a huge milestone for the two  East African nations..

This particular event had been put off  following the sudden death of President Magufuli . The East African Crude Oil Pipeline is a 1,445-kilometer-long pipeline from Uganda’s oil wells 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 will be heated because Uganda’s oil is waxy in nature.

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. The two oil fields are operated by China National Offshore Oil Corporation (CNOOC) and Total S.A.

The pipeline project is being implemented by a joint venture of CNOOC and Total; Uganda government through the Uganda National Oil Company and Tanzania Petroleum Development Corporation.

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 in a major deal that  kick-start  Uganda’s oil dream journey in the lake  Albert multi-million project which had stalled for years.

 In a press statement, issued in Paris on April 23, 2020 Total announced that it had bought Tullow’s entire interests in Uganda Lake Albert Development project including the East African Crude Oil Pipeline.

 Total will pay Tullow 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. The statement indicated that the terms of the  transaction had been discussed with the relevant government of Uganda and Uganda Revenue Authority (URA)officials and an agreement in principle had been reached on the tax treatment of the transaction.

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.

Total’s  Chairman and Chief Executive Officer , (CEO) Mr. Patrick Pouyanne said that the acquisition will enable the company together with its partners to move the project forward thus driving the costs down in order to deliver a robust long-term project.

Uganda’s oil production has previously be 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

MOSES SSERWANGA

Writer is a media and communications consultant And Advocate of the High Court of Uganda

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