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Museveni suspends pipeline decision after meeting Uhuru

Tuesday March 22 2016

Uganda on Monday delayed making a final decision on the proposed shipping of its crude oil through Kenya’s Lamu port, setting up Kenya and Tanzania for intense rivalry in their quest to become the preferred regional trade and transport hub.

President Uhuru Kenyatta Monday hosted Uganda’s Yoweri Museveni in Nairobi for what was pitched as a business meeting to discuss a joint crude pipeline to serve the two countries but failed to reach a final deal.

READ: Museveni in Nairobi for talks with Uhuru over crude pipeline

A joint statement by Kenya’s Energy and Petroleum minister, Charles Keter, and his Uganda counterpart, Irene Muloni, said the two heads of state agreed to hold further talks in Kampala in a fortnight to allow their technical teams to complete comprehensive reviews of what it would take to build a crude oil pipeline through Tanzania and Kenya.

“The two leaders (Mr Kenyatta and Mr Museveni) agreed to meet after two weeks to allow their officials harmonise their presentations,” the ministers said, adding that the technical teams would focus on comparative costs of building a pipeline through Kenya and Tanzania as well as ease of construction on either route.

The technical teams are further expected to provide absolute assessment of the viability of the pipeline given the proven crude reserves, including the suitability of Lamu, Tanga and Mombasa ports as export options.

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The Nairobi meeting came just weeks after Mr Museveni and Tanzanian president John Magufuli reached a deal to build a 1,120 kilometre oil pipeline between Tanga and Uganda where an estimated 6.5 billion barrels of oil were discovered in the Albertine basin near the border with Democratic Republic of Congo (DRC).

Last week, Tanzania said oil marketer Total, which has a stake in Uganda’s crude oil discoveries, had set aside $4 billion to build a pipeline from the Ugandan oilfields to the Tanzanian coast and that Dar es Salaam wants the three-year construction schedule shortened.

The twist of events rattled Kenya, which now finds itself in a head-to-head competition with Tanzania to win Uganda’s nod to have its oil exported through Kenyan territory.

READ: Uganda dumps Kenya for Tanzania in oil pipeline deal

Tanzania has previously been labelled a “lone ranger” among EAC partners on key integration issues such as trade and infrastructure development — a tag it sought to shed with the Uganda pipeline deal.

Although Uganda said in August 2015 that it had agreed to the Kenyan route, it changed its stand and said Nairobi had to guarantee security for the pipeline, along with financing and cheaper fees than alternatives.

Total has previously also raised security concerns over the Kenyan route which would run close to the volatile northeastern region where militant groups such as Al-Shabaab remain a threat.

Some industry players, including Britain’s Tullow which has interests in Kenya and Uganda, however, argued that connecting the Kenyan fields, which have estimated total recoverable reserves of 600 million barrels, alongside Uganda’s deposits would make the pipeline project cheaper with shared costs.

The inclusion of sea ports as a key determinant in the pending decision by Uganda is expected to fan rivalry between Kenya and Tanzania.

The two neighbours are in a head-to-head race to become the preferred regional trade and transport hubs with massive expansion of sea ports, connecting railway and road networks.

Tanzania, like Kenya, is hoping to capitalise on its long coastline and upgrade of its existing shaky railway and roads networks to serve the growing but land-locked economies of Africa.

Tanzania last year launched a plan to spend $14.2 billion to construct a new railway network in the next five years as part of its quest to become a regional transport hub.

The Transport ministry said the projects would include constructing a 2,561km standard gauge railway connecting the Dar es Salaam port to land-locked neighbours, Rwanda and Burundi.

READ: Eight firms pre-qualified for Tanzania-Rwanda SGR line

Two additional lines would also be built to connect Dar es Salaam to the coal, iron ore and soda ash mining areas in the south and northern parts of the country.

Tanzania has also announced plans to increase the capacity of its main Dar es Salaam port to handle 28 million tonnes a year by 2020 from last year’s 14.6 million tonnes to rival the Kenyan port of Mombasa.

The two ports are the main gateways to the East African markets and also service markets in South Sudan and the Great Lakes region, handling key items such as fuel, consumer goods and other imports as well as tea and coffee exports from the region.

READ: Tanzania, Kenya seek US funding for ‘old’ ports

Kenya is also constructing a Ksh327 billion 609 kilometre new standard gauge railway between Mombasa and Nairobi to boost the movement of cargo from the port and its competitiveness.

Besides, Kenya is building a second container terminal valued at Ksh28 billion in Mombasa to handle increased trade within the region, driven by a boom in the construction industry, vast infrastructure development and an emerging middle class.

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