Oil pipeline investment decision for early 2018 as designs near completion

Uganda and French oil giant Total E&P are tentatively looking at the first quarter of 2018 for reaching a final investment decision on the proposed East African Crude Oil Pipeline from Hoima to Tanga port at the Indian Ocean.

The decision, according to industry sources, is informed by the near-completion of the Front-End Engineering Design study, or FEED, for the pipeline.

Total officials say the FEED study report is at “completion stage for submission”, while Energy minister Irene Muloni said it is “expected to be completed” by end of next month. Ms Muloni was presenting a sector update to officials and delegates at the third Uganda International Oil and Gas Summit.

The project’s front-end engineering design study was awarded last December to US-based Gulf Interstate Engineering and Danish consultancy, NIRAS Gruppen A/S; the two firms are assisted by a team of Ugandan and Tanzanian engineers. Its completion timeline was 8 months.

The project’s front-end engineering design study was awarded last December to US-based Gulf Interstate Engineering and Danish consultancy, NIRAS Gruppen A/S; the two firms are assisted by a team of Ugandan and Tanzanian engineers. Its completion timeline was 8 months.

The FEED study looks at the project’s technical requirements to give a clear picture and enable a final investment decision, eventually leading to the engineering, procurement, and construction stage.

Construction of the 1,445km pipeline is expected to commence later in 2018 and will take a total of 36 months.

In the meantime, environmental social impact assessment studies for the project are continuing with a completion date of “February 2018 and thereafter a final investment decision will be made,” Ms Muloni told the summit on Wednesday.

The project is to be financed with debt.

Discussions to form a special purpose vehicle to construct, own, and operate the EACOP are in advanced stages. The special purpose vehicle, referred to as Pipe Co, will also negotiate the shareholder’s agreement, project financing agreements and transportation agreement between Shippers of oil from Tanga port to the international market.

Pipe Co will pay back the lenders from the project’s returns.

Related: Uganda, Tanzania agree on $3bn crude oil pipeline tax plan