Thursday, 13 December, 2018

Uganda: Hope for oil production by 2018 after pipeline deal

Munir-800x534 Uganda: Hope for oil production by 2018 after pipeline deal
Melinda Barton | 01 May, 2016, 12:09

A communiqué issued by the Ugandan government said delegates had embraced decisions to build pipelines from Uganda through Kenya and Tanzania to get crude oil to port facilities.

Bukenya Matovu, spokesman for Uganda's energy ministry, said Tuesday the agreement with Tanzania comes after months of uncertainty over which route the pipeline would take.

In a statement, the firm said, "While we have always believed that a joint Uganda-Kenya export pipeline was the most cost-effective option, we are clear that both Uganda and Kenya's oil resources can be developed separately".

The French oil company Total, which has investments in Uganda, said the pipeline decision "is a major milestone towards the development and production of Ugandan resources". Uganda's oil reserves are estimated at about 6.5 billion barrels.

A number of financial institutions are interested in funding the Kenyan pipeline, Kasuku said, without identifying them.

Kenya insists that it will continue with construction of its own pipeline linking 600 million barrels of oil in the Lokichar basin (in the northwestern Turkana County) to the coastal city of Lamu, home to a future port.

However, Kenyan officials said that Kenya chose to abandon negotiations with Uganda for the pipeline project because the talks dragged on for long and had paralysed preparations for the construction of Kenya's oil pipeline. Without Uganda's help, Kenya, Tullow, and its partners may have to spend as much as $4.5 billion to build their own pipeline.

Estimates of the cost of the Lamu corridor transport and infrastructure project, known as LAPSSET, are around $20 billion (18 billion euros), incorporating new roads, railway lines, airports, cities and pipelines from oil fields in Uganda and South Sudan connected to a new Lamu refinery and port. "To build its own pipeline at the moment is not viable", he said.

Successes at Tullow's Etom-2 well underpinned the company's confidence, Cazenove said.

Kenyan Lands Minister Jacob Kaimenyi said the Uganda and Kenya pipelines would be developed independently.

"For Tullow, closure on this issue could prove to be a catalyst for a farm-out of Uganda, now 33 percent and Kenya 50 percent, which is a strategic priority for the company in its quest to improve the balance sheet", UBS said.

When completed, it will be East Africa's first major oil pipeline. The oil will initially be moved by both road and rail to the coastline.