Uganda and Kenya to build separate pipelines

After a few days of speculation that Uganda had preferred the Tanzania route over through the Lamu port it is now official that Kenya and her western neighbor will be building two separate pipelines to evacuate oil reserves discovered in the two East African nations as OilNews Kenya had earlier reported.

“On crude oil pipeline the summit agreed that two crude oil pipelines, one from Lokichar to Lamu and another from Hoima to Tanga will be developed by Kenya and Uganda respectively,” said a statement from the 13th Northern Corridor Integration Projects (NCIP) summit communiqué.

According to Tullow Oil Kenya Country Manager Martin Mbogo which holds licenses in both countries despite the disappointing news the company will now move towards development.

Tullow which has been pushing for a joint pipeline adds it is however clear that that both Uganda and Kenya’s oil resources can be developed separately with Uganda using the southern route through Tanzania while Kenya will see a pipeline from northern Kenya to the Lamu port.

“Tullow has always stated that the decision around a regional crude oil pipeline was a government-to-government decision and we are pleased that a decision has been made. While we have always believed that a joint Uganda-Kenya export pipeline was the most cost-effective option, we are clear that both Uganda and Kenya’s oil resources can be developed separately. We will now work with both the Government of Uganda and the Government of Kenya and our JV partners in both countries on moving these exciting projects towards development,” Mbogo told OilNews Kenya.

The decision follows a study by technical teams from Kenya, Uganda and Tanzania which have been deliberating for the past two weeks following efforts by both President Uhuru Kenyatta and Yoweri Museveni to come to a compromise and come up with the most cost efficient route.

Whilst Uganda has the finances of the project already confirmed by French oil giant Total it is not immediately clear where finances for the Kenya pipeline will come from with a farm-out by Tullow Oil likely. Maersk Oil and Gas will carry part of Africa Oil development cost amounting to 400 million as per the farm out agreement.

“The summit directed Ministers of Finance to establish harmonized financing models to facilitate the private sector’s participation in the projects. Ministers of Finance in conjuction with Ministers of Energy were directed to engage the private sector on financing of the refined petroleum product pipeline through the Public Private  Partnership model. The Heads of State directed Ministers of Finance to continue sourcing funds for other projects,” the communique statement continues.

The decision also allows the companies to go ahead with plans on pre development and development phase with the much awaited verdict having acted as a point of uncertainty.

Another major announcement from the   13th Northern Corridor Integration Projects (NCIP) summit in Kampala was that Tanzania would invest in the shareholding of the refinery in Uganda.