Uganda–Tanzania Crude Oil Pipeline

From Global Energy Monitor
This article is part of the Global Fossil Infrastructure Tracker, a project of Global Energy Monitor.
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Uganda–Tanzania Crude Oil Pipeline, also known as the East African Crude Oil Pipeline (EACOP) or the Hoima-Tanga Port Oil Pipeline, is a proposed oil pipeline in East Africa.[1]

Location

The oil pipeline would start in Buseruka sub-county, Hoima District, in Uganda's Western Region. It would travel in a general south-easterly direction to pass through Masaka in Uganda, Bukoba in Tanzania, loop around the southern shores of Lake Victoria, continue through Shinyanga and Singida town, and end at the Port of Tanga, Tanzania, for export from the Indian Ocean.[2] Eighty percent of the pipeline runs through Tanzania.[3]

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Project Details

  • Operator: Total and CNOOC
  • Current capacity:
  • Proposed capacity: 200,000 barrels per day
  • Length: 1,444 kilometers
  • Status: Proposed
  • Start Year: 2023/24[3]

Background

The pipeline is intended to transport crude oil from Uganda's oil fields to the Port of Tanga, Tanzania on the Indian Ocean.[4] The pipeline is planned to have capacity of 216,000 barrels per day.[5][6]

Uganda previously agreed to build a joint Uganda–Kenya Crude Oil Pipeline (UKCOP) to the Lamu Port in Kenya.[7][8] Concerns regarding security and cost, however, reportedly motivated parallel negotiations with Tanzania regarding a shorter and safer route to Port Tanga, with the support of the French petroleum conglomerate Total SA.[9][10]

At the 13th Northern Corridor Heads of State Summit in Kampala in April 2016, Uganda officially announced its choice for the Tanzania route for its crude oil, in preference to the Mombasa or Lamu routes in Kenya.[11][12] At the same summit, President Uhuru Kenyatta announced that Kenya would build the Kenya Crude Oil Pipeline on its own, thereby abandoning the Uganda–Kenya Crude Oil Pipeline (UKCOP).[13][14]

In July 2016, it was announced that construction of the pipeline would begin in January 2017 and last 36 months.[15] Completion of the pipeline was planned for 2020.[16] In August 2017, Ugandan President Museveni and Tanzanian President Magufuli laid a symbolic foundation stone for the project.[17]

In September 2019, Total suspended all work on the pipeline construction following the collapse of a deal to buy a stake in Tullow Oil Plc’s oil fields in Uganda.[18] (Tullow's attempt to sell the stake in its Uganda fields was likely made under duress, as the firm's finances were collapsing in 2019–20 — a development which has also endangered the Lokichar–Lamu Oil Pipeline in Kenya.) According to a financial analyst, the Ugandan government had repeatedly stepped up borrowing to finance the project, despite the final investment decision (FID) being repeatedly pushed back; this fact had increased pressure on the Uganda Revenue Authority to win substantial capital gains tax revenues from Tullow's wind-down, thus leading to an impasse between the government and the firms backing the project. Ugandan president Museveni had also reportedly repeatedly pressed tough demands for the project's sponsors, such as also constructing a refinery (the country currently has no oil refineries). In November 2019, Ugandan government officials expressed confidence that the disagreements would be resolved.[19]

In April 2020, the Tullow wind-down impasse was resolved, with Total reaching an agreement to buy out Tullow's shares in the Lake Albert project licenses for US$575 million, and also reaching a tax agreement with the Ugandan government. Total stated at the time that the sale would allow them, together with CNOOC, to move forward towards FID on the pipeline project.[20][21] In May, Tanzania's Minister of Energy stated that construction was slated to begin in April 2021.[22] However, the construction schedule would seem to be dependent on the project's sponsors finally reaching FID.

In September 2020, FID was reached when the governments of Tanzania and Uganda signed an agreement on the pipeline's construction. The agreement followed quickly on from the signing of a Host Government Agreement between Uganda and Total which protects the French company's rights and obligations in the pipeline’s construction and operation.[3]

Critical independent review of the Environmental and Social Impact Assessment

In June 2019, the Netherlands Commission for Environmental Assessment (NCEA) published an independent quality review of the Ugandan part of the Environmental and Social Impact Assessment (ESIA) of the project, following a request from the Ugandan National Environmental Management Authority (NEMA).

The NCEA concluded that "the ESIA report does not yet provide enough information for sound decision making", citing exaggerated claims about jobs and other economic benefits; significant potential negative impacts to wetlands due to open trench water and wetland crossings; unsubstantiated claims of negligible impacts on land ownership, and; insufficient treatment of energy/CO2 impacts.[23]

Human Rights Impact Assessments

Published by Oxfam, the International Federation for Human Rights (FIDH) and partners on EACOP on the eve of the FID in September 2020, two community-based human rights impact assessments warned of the serious challenges and future risks linked to EACOP and associated oil extraction projects. Both reports offer community-driven recommendations urging the oil companies and governments involved to take urgent measures to avoid a human and environmental disaster.

'Empty Promises Down the Line? A Human Rights Impact Assessment of the East African Crude Oil Pipeline', authored by Oxfam, Global Rights Alert, the Civic Response on Environment and Development, and the Northern Coalition on Extractives and Environment, assesses the impacts of the EACOP pipeline.[24] The report concludes that neither the government of Uganda nor Tanzania appears to have adequately fulfilled their human rights obligations, and highlights that significant human rights and environmental risks remain and must be addressed.

'New Oil, Same Business? At a Crossroads to Avert Catastrophe in Uganda', authored by FIDH and the Foundation for Human Rights Initiative, reviews the past and present impacts of construction and exploration activities and future upstream oil extraction sites in Uganda.[25]

Ownership

As at August 2017, the list of potential equity partners includes:[26] (1) The government of Uganda, represented by Uganda National Oil Company, (2) the government of Tanzania, represented by the Tanzania Petroleum Development Corporation, (3) Total SA, (4) Tullow Oil and (5) China National Offshore Oil Corporation (CNOOC).[26] In May 2020, Tullow sold their interest in the project to Total.[21]

Cost and funding

The 1,444-kilometer planned pipeline is expected to be built at a budgeted cost of US$3.5 billion.[5][27] Thirty percent of the project costs are expected to be provided by the equity investors in the project, with the remaining US$2.5 billion to be provided via project finance loans.

Negotiations and the search for international lenders is ongoing. Uganda and Tanzania are being advised by Standard Bank of South Africa, while Total SA is being advised by Sumitomo Mitsui Banking Corporation. The London-based firm law firm Clifford Chance is advising Total SA on legal matters, while CNOOC is being advised by the the Industrial and Commercial Bank of China.[26] Standard Bank of South Africa and Sumitomo Mitsui are also understood to be acting as joint lead arrangers for the project loan.[28]

In April 2020, the African Development Bank (AfDB) publicly responded to a letter sent by a coalition of civil society organizations asking the bank not to fund the project. In its response, the AfDB denies that it ever considered funding the project.[29]

Articles and resources

References

  1. Uganda–Tanzania Crude Oil Pipeline, Wikipedia, accessed September 2017
  2. Musisi, Frederic (7 March 2016). "Oil pipeline: Which way for Uganda?". Daily Monitor. Kampala. Retrieved 7 March 2016.
  3. 3.0 3.1 3.2 Uganda, Tanzania sign agreement for construction of crude oil pipeline, Reuters, Sep. 13, 2020
  4. Elias Biryabarema, and Fumbuka Ng'wanakilala (2 March 2016). "Uganda, Tanzania plan oil pipeline". Reuters.com. Retrieved 3 March 2016.
  5. 5.0 5.1 The Independent Uganda (6 August 2017). "Uganda: Museveni, Magufuli Lay Foundation Stone for Oil Pipeline". The Independent (Uganda) via AllAfrica.com. Kampala. Retrieved 8 August 2017.
  6. Barigaba, Julius (6 March 2017). "Museveni's visit to Dar rescues oil pipeline deal, sets project timelines". The EastAfrican. Nairobi. Retrieved 6 August 2017.
  7. Biryabarema, Elias (25 June 2013). "Uganda agrees to plan for oil pipeline to new Kenya port". Reuters.com. Retrieved 28 April 2016.
  8. Bariyo, Nicholas (25 June 2013). "Uganda, Kenya Agree to Construct Crude export Pipeline to Port Lamu". Wall Street Journal Quoting Dow Jones Newswires. New York City. Archived from the original on 6 July 2013. Retrieved 28 April 2016. Cite uses deprecated parameter |deadurl= (help)CS1 maint: unfit url (link)
  9. Allan Olingo, and James Anyanzwa (17 October 2015). "Regional power play in tussle over new route of Uganda oil pipeline". The EastAfrican. Nairobi. Retrieved 3 March 2016.
  10. Abdalah, Halima (13 September 2015). "Oil firms prefer Tanga pipeline route to Lamu". The EastAfrican. Nairobi. Retrieved 3 March 2016.
  11. Musisi, Frederic (23 April 2016). "Uganda chooses Tanga route for oil pipeline". Daily Monitor. Kampala. Retrieved 23 April 2016.
  12. Musisi, Frederick (26 April 2016). "Transporting oil to Tanzania to cost UShs40,000 per barrel". Daily Monitor. Kampala. Retrieved 26 April 2016.
  13. PSCU (23 April 2016). "Kenya will build own pipeline, Uhuru tells EAC summit". Daily Nation. Nairobi. Retrieved 26 April 2016.
  14. Ligami, Christabel (16 April 2016). "As Uganda chooses Tanzania pipeline route, Kenya to go it alone". African Review. Nairobi. Retrieved 26 April 2016.
  15. Mugerwa, Francis (8 July 2016). "Building of Hoima-Tanzania oil pipeline will start in January". The EastAfrican. Nairobi. Retrieved 12 July 2016.
  16. Reuters (3 August 2016). "Tanzania aims to complete oil pipeline from Uganda in 2020". The East African Quoting Reuters. Retrieved 3 August 2016.
  17. The EastAfrican (5 August 2017). "Magufuli, Museveni lay foundation stone for crude oil pipeline". The EastAfrican. Nairobi. Retrieved 5 August 2017.
  18. Total Suspends Planned $3.5 billion Uganda-Tanzania Oil Pipe, Bloomberg, Sep. 4, 2019
  19. Ian Lewis, Uganda battles to revive oil project, Petroleum Economist, 21 Nov. 2019.
  20. Uganda underlines its intention to become a major oil and gas player, Africa News/APO Group, 23 Apr. 2020.
  21. 21.0 21.1 Total acquires Uganda pipeline interests, Pipelines International, 21 May 2020.
  22. Sihle Qekeleshe, Tanzania to Construct a Crude Oil Pipeline in 2021, Africa Oil & Power, 13 May 2020.
  23. ESIA EACOP Oil Development - Uganda, Netherlands Commission for Environmental Assessment, Jun. 27, 2019
  24. "Empty Promises Down the Line? A Human Rights Impact Assessment of the East African Crude Oil Pipeline", Oxfam, Global Rights Alert, the Civic Response on Environment and Development, and the Northern Coalition on Extractives and Environment, September 2020
  25. "New Oil, Same Business? At a Crossroads to Avert Catastrophe in Uganda", International Federation for Human Rights and the Foundation for Human Rights Initiative, September 2020
  26. 26.0 26.1 26.2 Musisi, Frederic (16 August 2017). "Uganda, TZ target 'flexible' European pipeline funding". Daily Monitor. Kampala. Retrieved 16 August 2017.
  27. Kidanka, Christopher (6 August 2017). "Tanzania ready to take up pipeline contracts". The EastAfrican. Nairobi. Retrieved 6 August 2017.
  28. Stanbic sees June 2019 close for $2.5 bln debt deal for Uganda's oil pipeline, Reuters, Nov. 21, 2018
  29. African Development Bank strongly rebuts claims that it plans to provide financial support to the East African Crude Oil Pipeline Project, African Development Bank press release, Apr. 18, 2020

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