How geopolitical intrigues killed Uganda-Kenya pipeline and birthed 1,400km Eacop
Tuesday January 03 2023
In the beginning, what we know today as the East African Crude Oil Pipeline (Eacop) was meant to be the Uganda-Kenya Crude Oil Pipeline (UKCOP), linking Uganda’s oilfields in Hoima in the west with those in Lokichar in Kenya’s northwest, and running southeast to the Lamu port.
Proposed in 2014, the UKCOP was to benefit the two neighbouring countries through cost sharing of infrastructure projects and revenues from oil exports.
Originally, the UKCOP was planned to also tap South Sudan’s oil which, according to a recently published study titled “Rivalry in East Africa: The case of Uganda-Kenya Crude Oil Pipeline and the East African Crude Oil Pipeline,” is of higher quality and much cheaper to extract. This was also seen as South Sudan’s opportunity to cut down its reliance on Sudan for oil exports. Juba would be shipping 130,000 barrels of oil per day before adding Uganda’s and Kenya’s.
In addition, the UKCOP would also tap into the integrated Lamu Port-South Sudan-Ethiopia Transport (Lapsset) Corridor project.
The UKCOP was especially important for Kenya because it fitted well in the Lapsset project, which would help the country offset some costs associated with developing its marginalised north.
The report says that Uhuru Kenyatta, Kenya’s president at the time, and eyeing a second term, “hoped to benefit at the ballot box by highlighting that the northern pipeline route would bring investments, jobs and other associated benefits.”
Listening to isolated Tanzania
Then Ugandan President Yoweri Museveni changed heart and started seriously listening to Tanzania, by then an isolated partner of the East African Community.
Tanzania under President Jakaya Kikwete had started looking inward for development and ignored many integration projects. During the Kikwete years (2005–2015), Tanzania’s relations with other EAC member states were strained, as his tenure was punctuated by disagreements – and Dodoma was cast as an impediment to regional integration.
This partly explains why Kenya, Uganda and Rwanda decided to form an informal coalition so that the three countries could fast-track regional integration through infrastructure development. This tripartite infrastructure initiative was (in)famously known as the Coalition of the Willing – and at the time the state of the EAC’s geopolitics favoured the UKCOP and other Northern Corridor infrastructure projects such as the standard gauge railway, which had been planned to connect Kenya, Uganda and Rwanda.
Also read: Kenya launches CoW line, Dar unveils alliance
By the time John Pombe Magufuli took over from Kikwete in 2015, Tanzania was isolated by its regional neighbours, and the new president came in determined to change that. But he turned out even more prickly and isolationist than Kikwete.
Read: How Magufuli is shaping East Africa’s geopolitics
The report by researchers Brendon Cannon and Stephen Mogaka says: “President John Magufuli initially sought to improve ties with neighbours. This was a direct challenge to Kenya’s historical dominance of the region and generally met a positive reception in other EAC states. Magufuli skilfully exploited Uganda’s traditional concerns about Kenya and highlighted the benefits of a Tanzanian pipeline by sending dedicated business and diplomatic delegations from Dodoma to Kampala.”
Magufuli’s delegations played up Tanzania’s ease of land acquisition, compared with Kenya’s, because in Tanzania the land is owned by the government. They also argued that Tanzania was better than Kenya in terms of security – and the port of Tanga did not even require dredging to be operational, unlike Lamu.
In the end, Magufuli’s delegations left Kampala triumphant, and the Ugandan government made the decision to bypass Kenya and pipe its oil through Tanzania to the Indian Ocean port of Tanga.
As the Kenyan government was anticipating the UKCOP to soon get off the ground, Uganda announced a feasibility study for an alternative pipeline that would cut through Tanzania. This was followed by an official announcement by Kampala that it had decided to build its oil pipeline through Tanzania.
TotalEnergies, one of the oil companies in the Ugandan oilfields, also seemed to favour the Tanga route. With its financial muscle and Museveni seeking to show gratitude to Tanzania for the support it gave him during the bush war, Kenya’s goose was cooked.
The report says that external parties, particularly oil majors, played a big role in the re-rerouting of the pipeline, taking advantage of the historical mistrust across the EAC to affect outcomes in their favour.
But, even though UK oil major Tullow Oil and China National Offshore Oil Corporation (CNOOC) also had interests in Uganda’s oil projects, it was TotalEnergies that played a pivotal role in pushing for the Tanga route, killing the UKCOP project.
“Total offered to build the Tanga pipeline and promised to source funding,” the report says. “The pledge of secured funding was particularly appealing to Uganda because fiscal challenges had previously delayed other infrastructure projects in the country such as dams and transport corridors.”
TotalEnergies exploration ambitions
The researchers say TotalEnergies particularly pushed for the Tanzanian route because of its 2017 decisions to explore oil in and around Lakes Tanganyika, Eyasi, Wembere and Rukwa.
“Both Eyasi and Wembere lie on the pipeline route,” the study says. “The Eacop, feeding south and east, will thus link more easily to Total's other oil interests in the Rift Valley system. Accordingly, Total lobbied aggressively for the Tanga pipeline – and continued to raise capital for the venture – until a final deal was signed in April 2021.”
At several forums in the run-up to Uganda’s signing of the final investment decision with the oil companies TotalEnergies and CNOOC in February 2022, President Museveni had indicated that he was opposed to the pipeline issue in favour of the refinery as the best way to commercialise the oil from the Lake Albert region.
Read: Museveni promises to ensure Eacop goes on
Uganda had even floated stake for the taking by EAC partners, but there was little appetite for it. Officials in Kampala, who have recently been quietly seeking funding for the $4 billion project, admit that it has struggled to attract investment commitments from other EAC countries, besides Tanzania and Kenya, who offered to take up part of Uganda’s 40 percent shareholding. Indeed, Africa Intelligence news service reported in July that Uganda is struggling to garner enough enthusiasm from private sector partners.
On paper, Uganda remains with a 29 percent stake, after Tanzania and Kenya take up their 8.5 percent and 2.5 percent shareholding respectively. Rwanda and Burundi declined participation in the project, while there is no local entity that has committed to take up shares.
When the oil companies insisted on the pipeline, Museveni vetoed the UKCOP in favour of the Eacop, not based on the economics of the option, but as a way to give back to Tanzania for its role in fighting Idi Amin in the late 1970s.
“The oil companies insisted, no we need a pipeline,” Museveni said in an interview with Uganda TV channel NBS. “So we had to agree to a pipeline mainly because it would also benefit our brothers in Tanzania. That’s why I actually agreed because I said if [Tanzania] they can get something…”
President Museveni was part of Ugandan military forces and political actors who were exiled, trained and sheltered in Tanzania, and President Julius Nyerere would later deploy Tanzanian army to support Ugandan exiles in the war that overthrew Idi Amin’s regime in April 1979.
The Ugandan leader would later “clarify” that his initial opposition to the Eacop project was in view of the $12.7 tariff, which is what Uganda will lose on each barrel of oil transported through the pipeline, but argued that if this money goes to Tanzania, then the pipeline through its territory is worth it.
“On the issue of the pipeline I actually agreed because of our brothers in Tanzania…because they are our very good friends, brothers…I don’t mind them sharing a little bit of this. Otherwise I would never have agreed to the pipeline,” President Museveni said.
Despite the initial deals signed by Nairobi and Kampala regarding the Northern Corridor infrastructure projects, Uganda’s desire to cut down its reliance on Kenya for its imports and exports – coupled with Tanzania’s skilful lobbying – led to the demise of the significantly promising UKCOP.
“The UKCOP foundered on regional rivalries and the clashing interests of political elites in Kenya, Uganda and Tanzania,” say Cannon and Mogaka.
“A spurned Kenya announced that it would build its own stand-alone pipeline to transport its oil reserves to the coast and, in (August) 2019, became the first country in the region to export its oil.”
Kenya’s consignment of 200,000 barrels fetched $12 million, according to the government. President Kenyatta announced the breakthrough on Twitter in a concise message: "We are now an oil exporter," and expressed confidence that the oil trade would help grow the economy and end poverty.
The oil production statistics were disclosed by London-based Tullow Oil, which has exploration and oilfields in Turkana.
“Some 200,000 barrels of oil have been safely delivered to Mombasa. Tullow expects East Africa's first export cargo of oil to be sold and lifted in the third quarter of 2019,” the multinational said in its trading update.
Testing oil ‘waters’
The export was intended to test the international markets’ reception of Kenya’s low-sulphur oil ahead of commercial production, which is estimated to start in the second half of 2023.
The report says that Uganda considered two factors in making the Tanga pipeline decision: The cost of construction and speed of completion. According to proponents of the Tanzanian route, it would also be cheaper because Tanzania had offered Uganda lower transit fees. While it would cost $5 billion to build the UKCOP, the Tanga route was about $1 billion less. Kenya is also said to have planned to charge Uganda between $12.60 and $15.90 per barrel in transit fees, but Tanzania reportedly agreed to charge $12.2 per barrel.
After the signing of the Hoima-Tanga pipeline deal in early 2021, President Museveni went to Twitter, where he described it as “a triple victory for Tanzania and Uganda: military, political, and economic.”
“While the military part of the victory is unclear given the context, Uganda has gone some distance in breaking free from the strategic detractions associated with its landlockedness and reliance on Kenya,” the report says.
That most of Uganda’s imports come through Kenya has, over the years, made Uganda look at it as overreliance on its eastern neighbour – and the country saw an alternative route via Tanzania as a welcome relief. The researchers cite 2008, when Uganda was nearly cut off from the rest of the world after Kenya descended into violence after the contested presidential election result that left more than 1,000 people dead and road transport blocked.
So, the Tanzanian route offered Uganda – both politically and economically – another outlet to the sea that skirted Kenya, even though Uganda and Tanzania had their own disagreements.
“Nairobi lost not only a potential pipeline to export its oil, the termination of the UKCOP torpedoed the single biggest fiscal support for its plans associated with the Lapsset Corridor,” the report says. “Nothing less than the interaction of political and economic processes – the political economy of East Africa’s oil – would decide which pipeline was built.”