Uganda and Tanzania are preparing to sign an agreement in December to build a 1,443-kilometre crude export pipeline from Hoima district in western Uganda through Bukoba in northern Tanzania to Tanga on the Indian Ocean coast.
The $3.5 billion 24-inch pipeline is expected to transport 200,000 barrels of crude oil per day to Tanga.
“The signing of the inter-governmental agreement in December will enable the two countries to choose a contractor to carry out a front end engineering and design (FEED) study of the pipeline,” said Uganda’s acting petroleum director Robert Kasande.
The FEED will help define cost estimates, scope of financing, and support of internal funding requirements. It will also evaluate options to improve the return on assets.
The inter-governmental agreement will address obligations of each government, land rights issues, dispute resolution, investor obligations, and harmonisation of legal, tax and financial structures.
Mr Kasande said a special purpose vehicle will be formed to build the pipeline, which is expected to be completed in 2020. He said Tullow Oil Plc with its joint venture partners had signed a memorandum of understanding with Uganda on development of a crude oil refinery in the Albertine basin.
The crude oil export pipeline will be connected to a central processing facility in the southern part of licenced production areas and another one in the northern part.
Uganda will receive royalties, annual fees, the state’s share of profit from oil and corporate income tax. Revenues from the licences are estimated to average about $1.5 billion per year for the duration of production of the fields.
“About $31 billion has been invested in exploration activities since the first discovery was made in 2006. In the next five years, $10 billion will be invested in field development and $10 billion in infrastructure facilities,” said Mr Kasande.
He said Uganda is expected to conclude negotiations with firms interested in Hoima’s $4 billion crude refinery.
The China Petroleum Pipeline Bureau is among 18 firms interested in taking up 60 per cent shares in the refinery.
A consortium led by RT Global Resources had been selected by Uganda to build the refinery under a public-private partnership arrangement but the government cancelled the deal in July when negotiations broke down.
“Discussions are being held with several interested parties. Once a deal is reached, the government and the lead investor will form a refining company that will undertake financing, construction and operation,” said Mr Kasande.
He said Kenya and Tanzania had confirmed their interest in acquiring 2.5 per cent and eight per cent shares respectively in the refinery while Total SA of France was interested in a 10 per cent equity.
Tullow, China National Offshore Oil Corporation (CNOOC) and Total of France each own a third of production licences granted in Uganda to date, with an estimated output of 200,000 to 230,000 barrels of crude oil per day.
CNOOC was in 2013 granted a licence to the Kingfisher field. Uganda in August 2016 issued five production licences in exploration area 2 (EA2) to Tullow and three production licences in Exploration Area 1 (EA I) to Total.
Tullow is the operator of Kasamene-Wahrindi, Kigogole-Ngara, Nsoga , Ngege and Mputa-Nzizi-Waraga oilfields in EA2. Total is the operator of Ngiri, Jobi-Rii and Gunya oilfields in EA I.