By
Domnic Omondi, NAIROBI Kenya
After warding off stiff competition from Kenya for years over the building of a crude oil pipeline from Uganda, Tanzania has moved closer to clinching the deal.
On Sunday, Tanzania and Uganda signed an
agreement for the construction of a Sh378 billion East African Crude Oil
Pipeline from Hoima in western Uganda to the port of Tanga, a move expected to
breathe life into Tanzania’s Central Corridor, which has been competing with
Kenya’s Northern Corridor.
Uganda had initially planned to transport its
oil through Kenya, which wanted a joint facility for the product from its own
fields in Turkana County.
But the signing of the agreement over the
weekend at a meeting attended by Tanzania’s President John Magufuli and
Uganda’s President Yoweri Museveni brings Dar es Salaam’s coup against Kenya
closer to success.
Kenya – which has an estimated 560 million barrels
of recoverable oil against Uganda’s 1.6 billion barrels – had eyed the
infrastructure as part of its grand plan to become a “preferred regional
petroleum transporter of choice”, according to official documents.
The planned Uganda-Kenya Crude Oil Pipeline
(UKCOP) was a critical anchor of the multi-billion-shilling Lamu Port-South
Sudan-Ethiopia Transport (Lapsset) Corridor.
However, Magufuli, nicknamed ‘bulldozer’ for
the way he rams through his policies, appears to have spoilt the party for
Kenya, winning a crucial battle in the long drawn-out war for control of the
region’s oil wealth.
Tanzania is expected to earn $3.24 billion
(Sh349 billion) from the pipeline and create at least 18,000 jobs over the next
25 years.
However, Petroleum Principal Secretary Andrew
Kamau downplayed the impact of the agreement, saying it was an affair between
Tanzania and Uganda.
“It has nothing to do with us. They were always
going to build a pipeline,” said Kamau.
But there are those who will not give up on the
country’s chances of courting Uganda back.
“I wouldn’t give up still. Until they get
financing for it and they start construction, that is when you know definitely
it is gone,” said Charles Wanguhu, a social activist and co-ordinator of the
Kenya Civil Society Platform on Oil and Gas.
Wanguhu said a lot is likely to happen this
year, particularly with the outbreak of Covid-19, which lowered demand for oil
and led to its price hitting record lows.
“It is not very clear yet how Covid-19 has
impacted the oil and gas sector, so even financiers of the pipeline might be
difficult to come by,” he said.
Wanguhu added that the combined oil reserves
for Uganda and Kenya were likely to be more attractive to a financier than
Uganda’s or Kenya’s alone.
However, as part of the bigger regional war for
the control and influence of the economy, experts insist that the only way for
Kenya to gain a competitive edge is by finalising and operationalising the Lamu
Port.
Gerishon Ikiara, an economist and former Transport PS, noted that Uganda and Tanzania have for a while not been happy with the continued dominance of the Kenyan economy in the region.
“Now they (Uganda and Tanzania) are doing all
kinds of things in an effort to come up and compete effectively with Kenya,” he
said, giving the example of the volume of trade where Uganda has significantly
slashed its trade deficit with Kenya by inviting foreign investors who have
developed industries within its borders.
He noted that for these countries, it is
competitiveness of infrastructure that will win the day, and this is where the
crude oil export pipeline falls.
But it is still uncertain when a final
investment decision (FID) on Kenya’s oil will be completed, which would set the
stage for the commercial production of oil from Turkana’s Lokichar area.
Commercial production of oil is a precursor for
the development of the Lamu Port.
Initially, it seemed as though Kenya had
successfully won over Uganda, and the crude pipeline would snake its way from
the oilfields in northern and western Uganda through Kenya’s oilfields in
Lokichar before getting to Lamu County.
Wanguhu noted that a joint crude pipeline was
the most viable option as both oil producers would enjoy economies of scale.
In April 2013, Uganda signed a deal with Tullow
Oil, Total SA of France and the China National Offshore Oil Corporation to
build both an oil refinery and the pipeline.
“The MoU lays out a market framework for Uganda
as a future oil producer, consisting of a crude export pipeline from the Lake
Albert Basin to the Kenyan coast, to be developed in parallel with a
right-sized petroleum refinery and the use of petroleum for power generation.
The Ugandan and Kenyan Governments have in principle agreed joint initiatives
for a crude oil pipeline,” said Tullow in its 2013 annual report.
The pipeline’s entire length will have to be
heated to keep the waxy oil found in both countries in a molten state for easy
evacuation.
In 2014, the two countries settled on Toyota
Tsusho as th consultant for the pipeline. But then in early 2016, Uganda,
started having a change of heart, with presidents Museveni and Magufuli
announcing plans to build a competing oil pipeline.
PS Kamau, however, maintains: “They are going
to build a pipeline and we are going to build ours. One has nothing to do with
the other.”
But the fight for the construction of the
pipeline has widened the rift between Kenya and Tanzania. At some point, Energy
Cabinet Secretary Charles Keter, his PS Joseph Njoroge, Kamau and Lapsset CEO
Sylvester Kasuku were denied entry into Tanga Port and their passports
confiscated.
The three were reported to have gone to the
region alongside a Ugandan delegation for the inspection of the port that is
competing with Lamu and Mombasa as the exit point for Uganda’s petroleum in
Hoima
Tanzanian authorities said they had not been informed of the visit by the Kenyan delegation. The Kenyan team insisted Dar es Salaam was aware of their visit and that they had gone to into the country to participate in joint talks between Uganda and Tanzania on the dispute over Uganda’s oil pipeline. - The Standard
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