Cost of two-way pipeline triples to $250m

A fresh twist in the never-ending drama of the Eldoret-Kampala oil pipeline has emerged.

The Energy Ministry and the project contractor are at loggerheads over the total cost of the project, whose design has been changed several times, The EastAfrican has learnt.

The latest changes in design have apparently pushed the project cost up by more than three times, to $250 million — which experts say will impact on the user tariff.

The contractor — Tamoil East Africa, a subsidiary of Libya oil giant Tamoil — wants to give the pipeline the capacity to route refined oil products both ways.

This is because it is becoming increasingly likely that an oil refinery will be built in western Uganda, signalling yet another arena of competing interests in Uganda’s oil find.

Tamoil-EA chairman Habib Kagimu says the pipeline’s design needs “reverse engineering” to pump oil products from the interior, and vice versa.

But other costs that have come into the picture include the refurbishing of the Jinja oil reserves depot and the changing of the pipeline’s diameter from six to 10 inches.

Because of this, the project’s total cost has more than tripled, from $80 million at the time of awarding the tender in January 2007 to $250 million.

That is an escalation of 213 per cent from the original cost.

But sources in the Ministry of Energy said this figure is being disputed.

“We have not agreed on the cost for this design. The cost is still being negotiated and it must come down. We are changing a lot of things, including the pipe diameter and reverse pumping. But still, there is no way this project can jump from $80 million to this,” a source said.

State Minister for Energy Simon D’ujang adopted a diplomatic tone when contacted on phone, saying he was aware of these design changes but that no figure was agreed on between the ministry and Tamoil.

“There have been changes. We now have a bigger pipeline and it is reversible. So we are aware that the final cost will change. But we are still discussing the cost. I cannot speculate on the figure and it’s not wise to do so when you are still discussing,” he said.

Procurement rules provide for revision of project costs, as long as the revised figure does not exceed 115 per cent of the original, after which there is an immediate re-tendering of the project. 

Should one party amend the cost more than once, the cumulative amendments must not exceed 25 per cent of the original cost.