Uganda and Tanzania mull going to international market for oil pipeline financing

Uganda, Tanzania and the three Joint Venture (JV) partners, Tullow Oil Uganda, Total E&P and Cnooc, will later this month issue a request for proposals for a consultant to offer transaction advice on the proposed $3.55 billion (Shs12,000 billion) crude oil export pipeline and its financing.

Documents seen by this site show that financing for the 1,445km pipeline from Kabaale (Hoima district) in Western Uganda via Kiboga, Mubende, Ssembabule, Masaka and Rakai, en route to the Tanzanian port of Tanga at the Indian Ocean, is still a “headache” most especially for Total which backed the southern route and later strong-armed its JV partners into the decision.

As a result, almost nine months later since Uganda disregarded Kenya and opted to build the pipeline throughTanzania, Total and the JV partners (the main financiers) are yet to iron out their differences and agree on a partnership framework agreement for the pipeline.

On Monday, Total’s General Manager Adewale Fayemi described discussions on the partnership framework for the project as a work in progress. He was speaking at the launch of the Front-End Engineering Design (FEED) for the pipeline,

The contract for FEED was awarded to Houston-based Gulf Interstate Engineering at a cost of $11 million. It will take a time period of eight months, helped by another Danish consultancy, NIRAS Gruppen A/S as well as Ugandan and Tanzanian contractors.

Irene Muloni, the energy minister, said that the FEED study will go hand in hand with other studies like the Resettlement Action Plan (RAP) and Environmental and Social Impact Assessments (ESIAs), with the view of fast tracking the project to pave way for commercial production to start by 2020.

Tanzania’s energy minister, Sospeter Muhungo said the study was important because it would give the partners a detailed structural view which will eventually lead them to a final investment decision.