Tanzania and Uganda finally sign the long-awaited US$15b oil pipeline deal

UGANDA – The governments of Uganda and Tanzania have joined oil companies Total of France and CNOOC of China in signing a series of accords that pave the way for the construction of a pipeline to carry crude from Uganda to Tanga port in Tanzania.

The US$3.5 billion project led by Total and China National Offshore Oil Corporation (CNOOC) provides for the management of oilfields in the Lake Albert region in Uganda’s west and proposes pumping the crude to the coast across Tanzania via the East African Crude Oil Pipeline (EACOP).

Eacop is expected to cost around US$3.5 billion, of which about US$2.5 billion will be debt borrowed from banks and other financiers while 30 per cent of the project is financed through equity from the oil companies Total, Cnooc and the host governments’ entities Uganda National Oil Company and Tanzania Pipeline Development Company.

The discovery of the crude reserves in 2006 sparked hopes in Uganda that the country could become an oil Eldorado but drilling and pipeline projects failed in the face of commercial and tax disputes.

A joint press release by the two governments say the agreements signed on April 11, 2021 by Uganda president Yoweri Museveni and his Tanzanian counterpart Samia Suluhu Hassan mean “all outstanding issues related to the EACOP Project have been amicably resolved”.

Signing of the deal was earlier scheduled for March 22, 2021 in Kampala but was postponed following the death of Tanzania’s President John Pombe Magufuli, who was a key driving force behind the pipeline.

It also stipulated that a shareholding agreement had been reached and that companies could now award construction contracts.

“The Uganda reserves could last 25 to 30 years with a peak production of 230,000 barrels per day”

Beneath the waters and on Lake Albert’s banks, a 160-kilometer natural border separating Uganda from the Democratic Republic of the Congo, lie some 6.5 billion barrels of crude, of which about 1.4 billion barrels are currently accessible.

The Uganda reserves could last 25 to 30 years with a peak production of 230,000 barrels per day.

The EACOP is a heated pipeline stretching 1,400 kilometres (900 miles), including a 300 km (180 mile) stretch within Uganda, that will carry the crude to the Tanzanian port of Tanga.

In March 2021, more than 250 local and international organisations addressed major banks in a letter calling upon them to refrain from financing “the longest heated crude oil pipeline in the world”.

The letter cites “extensively documented risks” including “impacts to local people through physical displacement risks to water, biodiversity and natural habitats; as well as unlocking a new source of carbon emissions”.

A deal for the US$3.5 billion East African Crude Oil Pipeline (Eacop) is a strategic win for Tanzania which will earn US$12.7 off each barrel of oil transported through it.

The deal is also a win for the oil companies, Total and China National Offshore Oil Corporation (Cnooc) which have spent years haggling with a reluctant President Museveni, to expedite the crude oil export pipeline instead of his favoured domestic refinery, for faster commercialisation of Uganda’s oil.

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