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Oil and gass in Uganda

Uganda has signed a memorandum of understanding with the Government of Tanzania that permits the two states to explore the possibility of developing a pipeline to route Uganda’s crude oil from Hoima in the mid-west of the country to the Indian coast through Tanga. Uganda is already engaged with the Government of Kenya on two options of establishing a pipeline to the coast; one via Mombasa and the other via Lamu.   

This latest development effectively means that Uganda is still far from a decision on how to route her crude to the East African coast, when eventually it starts flowing out of the ground in 2019. It means that the land-locked East Africa country is still searching for the best pipeline deal to the coast, which is a different position from the hitherto held view that Uganda is in advanced stages of developing a pipeline through Kenya to the coast.
Uganda, Rwanda and Kenya ( with a conspicuous absence of Tanzania and Burundi, the other members of the East African Community) have in the last couple of years been intensively engaged on developing infrastructure projects under the Northern Corridor Infrastructure Projects- including the standard Gauge Railway, the Great North Road and the oil pipelines. It is not clear at this point whether the signing of the MoU with Tanzania points to Uganda’s dampening interest to the Northern corridor pipeline engagement with Kenya. What is nearly certain is that ultimately only one pipeline will be built.

A statement released by Uganda’s Ministry of Energy & Mineral Development quoted Fred Kabagambe Kaliisa, the Ministry’s Permanent Secretary as saying:  “As a country, we are evaluating the routes with the idea that we have the least cost route because we would like to ensure that our crude oil has value. The MoU enables the Parties (Uganda and Tanzania) to continue working together to fine tune studies and field work on the Tanga route in order to further appraise the merits of a crude export pipeline option through Tanzania with a view to achieving the lowest unit transportation cost for crude oil from Uganda .’’  

Adewale Fayemi the General Manager Total E & P Uganda, was perhaps more succinct. He described  the  MoU between Uganda and Tanzania as “a key milestone of achieving the least cost option to transport Uganda’s crude oil to the Indian Ocean Coast, and we look forward to fine tune the process adding that Total E&P is committed to supporting the route and collaborating with all the partners involved. . “
Tullow Oil and Chinese CNOOC, the other licensed operators in Uganda’s oil sector did not participate at the MoU signing. And no explanation was provided for their absence.

The statement (from Uganda’s Ministry of Energy & Mineral Development), however said, “ Uganda is currently undertaking a process to identify and assess the comparative merits of three pipeline routing options, two via Kenya to Mombasa and Lamu, and one via Tanzania to Tanga, in respect of the export of crude oil from Uganda to the international market. The objective is to select a route that will result in the lowest unit transportation cost and constitutes the most viable option for the pipeline project.”