Cost of two-way pipeline triples to $250m

A senior official at the Public Procurement and Disposal of Public Assets Authority says the procurement watchdog has no jurisdiction over the contract because it was handled “at international level” between Tamoil and the two countries.

The delays imply a possible spike in the pipeline’s tariff that was originally projected at $20 per 1,000 litres, representing a 40-50 per cent reduction from the cost of transporting oil products by rail.

In February this year, the government acquired a one square mile piece of land 20 km west of Kampala, where the pipeline’s inland terminal will be built.

Since acquiring land along the pipeline’s 224km route within Uganda was proving a huge hurdle, the Ministry of Energy was keen on fast-tracking this part of the project. The contractor was to start construction in May this year.

So far, the government has secured land only for the inland terminal, and has completed the evaluation of some 130km for the pipeline access land between Jinja and Tororo.

Aware that acquiring land between Jinja and Kampala is more costly than in the rest of the route, the contractor is reportedly waiting for the government to get all the necessary access before any work starts.

“The cost of land will determine the tariff. The contractor wants to know whether the project is viable,” a source said.

Project manager Ahmed El Gembri declined to comment on the delays when contacted on phone.

The Eldoret-Kampala pipeline is a joint venture between the governments of Kenya, Uganda and private investor Tamoil.

The contract was awarded to the Libyan state subsidiary in 2007 — 20-year build, own operate and transfer (BOOT) tender for the 352km pipeline.

From the outset, the project split was 51 per cent for Tamoil and 24.5 per cent each for the two governments.

Along the way, Uganda cited lack of funds to meet its equity, thus diluting its ownership in the pipeline, but maintaining a “carried interest.”

Last year, Kampala ceded 12 per cent of its stake in the pipeline to Tamoil and other private interests.

This means that its equity contribution also significantly came down from $5.8 million as the government concentrated on mainly providing land as its contribution.

Reports indicate that only about 10 per cent of land acquisition remains.