Uganda’s oil pipeline segment to cost $700m

Uganda’s section of the proposed East African Crude Oil Pipeline from Hoima to the Tanzanian border will cost an estimated $700m (approx. Shs2.4 trillion), according to an ongoing analysis of the project.

The 1,445km pipeline will run from Hoima in mid-western Uganda to Tanga port at the Indian Ocean in Tanzania. The entire project is expected to cost $3.5bn (Shs11trillion), of which 80% will be spent in Tanzania.

According to working documents for the project, the first EACOP pumping station will be installed at Kabaale industrial area in Hoima, contributing to the technical and economic development of that zone as well as allowing third-party access for new regional oil discoveries.

Documents this website has seen indicate that the pipeline hub at Kabaale could also be a potential linkage for crude oil delivery from neighbouring countries—DR Congo and South Sudan—seeking to commercialise their oil resources.

Therefore, “it is conceivable that annual direct in-country spend, could be in the region of $120m, (based on 50% spent on construction in country and 50% spent on materials, and engineering services overseas),” one project brief seen by this website reads in part.

Uganda and Tanzania, backed by French oil major Total E&P, are tentatively looking at the first quarter of 2018 for closing Final Investment Decision (FID) and subsequently Engineering, Procurement and Construction (EPC) in mid-2018.

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

The plan on the table, is to raise 70% of the $3.5bn capital expenditure from international lenders while the remaining 30% capital will be mobilised through equity by Total and its joint venture partners—Tullow (10%) and Cnooc, and the national oil companies of the two countries – Tanzania Petroleum Development Corporation and National Pipeline Company, a subsidiary of Uganda National Oil Company.

Uganda is expected to provide half of the 30% equity, in conformity with its 15% stake in the upstream ventures. The 15% stake could translate into $106m.

The general manager of the National Pipeline Company, Bosco Habumugisha, told this website that work on the final equity structure is ongoing. The contractors on the project are Japan’s Sumitomo Mitsui Banking Corporation Europe Ltd (SMBCE), with Standard Bank, and the Industrial and Commercial Bank of China Limited (ICBC) acting as the transactional advisors for the multibillion-dollar project.