Tanzania and Uganda on Thursday signed crucial agreements which will pave way for the construction of the 1,403 kilometre oil pipeline next year.
Laying of the pipeline from the oilfields in Lake Albert north-west of Uganda to Tanga port and associated civil works will cost an estimated $12 billion (Sh1.2 trillion), according to officials of both countries.
It is expected that at the end of construction in 2020, the 24-inch pipeline will deliver about 200,000 barrels of crude oil per day.
Tanzania minister for Energy and Minerals Prof Sospeter Muhongo told reporters in Arusha that officials from the two countries have discussed how people who would be relocated to pave way for the pipeline would be compensated.
FOR THE FIRST TIME
However, Prof Muhongo would not go into details on the actual route of the proposed pipeline within Tanzania, only mentioning Kagera and Singida regions as well as the port city which is within Tanga region.
Other regions in which the pipeline may pass include Geita, Shinyanga, Simiyu and Manyara.
President John Pombe Magufuli and his Ugandan counterpart Yoweri Kaguta Museveni for the first time revealed the joint project during a media briefing in Arusha on March 1st ahead of the East African Community (EAC) leaders’ summit.
Uganda plans to start drilling oil from Lake Albert and it is believed the land-locked country wants to use the pipeline to export its oil to Tanzania where no oil has been found despite the country having vast reserves of natural gas.
Apparently the proposed pipeline caught Kenya by surprise because Uganda passes a bulk of its exports through the Mombasa Port.
But actual production of oil in Uganda has come at a time demand has gone down in much of Africa, including the country’s closest neighbours such as South Sudan, whose economy is tottering on near collapse due to sole dependency on oil whose prices have dropped sharply.
Kenya, one of the largest consumers of oil in the region, is in the process of drilling its own oil after discoveries in the Lake Turkana basin in the north.
On her part, the Ugandan minister for Minerals and Energy Development Ms Irene Muloni told journalists that the agreement reached by the two countries stressed that the quality of petroleum products should not be compromised.
She said her country would produce quality oil which will attract buyers in the international markets. The Ugandan minister was not clear on the oil refineries and which of the two refined or crude products, would be exported.
Speaking during the press conference, the director of Total Uganda Adewale Fayemu said of the $12 billion set aside for the project, some $4 billion would be spent on laying down of the pipeline while $8 billion would be spent on other associated expenses such as refining of oil.
He said his firm would be the main financier of the multi-billion dollar project which he hoped would contribute to the economic growth of the two countries.