Landlocked Uganda on Saturday announced plans to export its future crude oil production via a new pipeline to be built to a Tanzanian port rather than via Kenya.
“We have agreed that the oil pipeline route be developed from Uganda in Hoima to the Tanzanian port of Tanga,” Uganda foreign affairs minister Sam Kutesa told AFP.
There was no immediate indication of the value of Saturday’s deal. However, Kutesa told AFP cost was a factor.
“We considered Tanga oil pipeline route based on a number of aspects — among them it is the least cost,” the Ugandan minister said as Ugandan President Yoweri Museveni, Kenyan counterpart Uhuru Kenyatta and Rwanda’s Paul Kagame held a regional mini-summit outside Kampala.
The first large discoveries of oil in Uganda date back to 2006 on the shores of Lake Albert. Reserves in the area are conservatively estimated at some 1.7 billion barrels.
But informed sources say production will not come on stream before 2025.
Three oil companies — Total (LSE: 524773.L – news) of France, Chinese giant CNOOC (HKSE: 0883.HK – news) and Anglo-Irish firm Tullow — each won a one-third rights share in 2009, but the issue immediately arose of how to export the crude from a country with no coastline.
After years of talks discussing the relative merits of different routes out to the Indian Ocean, Uganda has chosen to run a 1,400-kilometre (800-mile) pipeline through Tanzania to the south of Lake Victoria through to the port of Tanga near the Kenyan border.
According to a Ugandan experts’ report dated April 11 and obtained by AFP, the Tanzanian project won the argument because the “Tanga port in Tanzania is fully operational while Lamu port in Kenya is still to be built”.
– Shebab security fears –
The experts also highlighted the fact that the port at Tanga is protected from winds by several offshore islands, which is not the case for Lamu, raising fears of navigational hazards for oil tankers near the future Kenyan port.
Kenya, where Tullow also found oil close to Lake Turkana in 2012, had proposed a pipeline from Uganda through impoverished northern Kenya to Lamu as part of an ambitious national development programme dubbed Vision 2030.
Estimates of the cost of the Lamu corridor transport and infrastructure project, known as LAPSSET, are around $ 20 billion (18 billion euros), incorporating new roads, railway lines, airports, cities and pipelines from oil fields in Uganda and South Sudan connected to a new Lamu refinery and port.
But the oil companies involved in Uganda preferred an alternative southern route through Kenya terminating at the existing major port of Mombasa.
Although cheaper at some $ 4.3 billion, Nairobi was concerned it would not deliver regional development in the neglected north.
There were also concerns for Uganda that parts of the Kenyan northern route would run near areas close to Somalia that might expose the pipeline to attacks by Al Qaeda-aligned Shebab militants.
The deadlock between the two sparked the emergence of the Tanzanian option, throwing development of the Lamu project into question.
Nairobi indicated Saturday it would continue with LAPSSET and build a pipeline for its own crude.
None of the countries in the region, however, are likely to emerge as a major oil player compared with Africa’s top producer Nigeria, whose daily production of some 2.4 million barrels a day gives it a global rank of 13th.
