Uganda has signed a landmark deal with Tanzania for the construction of the world’s longest electrically heated crude oil pipeline, working in partnership with French oil supermajor Total.
The 1440km export pipeline, expected to be completed within three years, has an anticipated cost of $3.5 billion. It will run from western Uganda to the Indian Ocean port of Tanga in Tanzania.
The deal between Uganda and Tanzania on Sunday marks the start of greater economic partnerships between the two countries in the energy sector and beyond. The governments of the two states hope the deal will encourage upwards of $15 billion in investments.
The long-anticipated project is expected to tap over one billion barrels of crude oil from Uganda, to transport them from a landlocked position to a key sea port. In order to transport the oil effectively, the pipeline will be heated to manage the high viscosity of the Ugandan oil.
Total East Africa Midstream, part of the supermajor energy group Total, will be developing the project. The construction of the pipeline is expected to solidify Total’s position in the African region.
Tanzania is not an oil-producing country, meaning that this pipeline offers significant potential to develop its oil import and export industry in partnership with Uganda. Oil extraction will be carried out in the Kingfisher oil field, operated by China National Offshore Oil Corporation Ltd (CNOOC), and the Tilenga field, operated by Total S.A.
While the two countries are optimistic about unlocking the potential for both oil and several other areas of their economies, environmental activists are less than enthusiastic. Many worry that the pipeline could have a detrimental effect on the environment, including damaging water sources and wetlands due to the increase in CO2 emissions.
However, there are significant benefits to be seen from the project, with an expected $1.7 billion of work for companies across the two countries during the construction phase. In addition, Tanzanian President Hassan stated, "The project will bring revenues to the regional countries and more than 10,000 jobs will be created".
The project follows several years of stalling since the initial commercial oil discovery by Tullow Oil Plc. in Uganda in 2006. Tullow hoped to commence exports as early as 2015 but eventually sold its stake in the country’s oil fields, leaving Total and CNOOC to develop Uganda’s oil exportation industry. Issues such as the geographic location of the pipeline, as well as tax concerns, delayed its development until now.
To date, 6.5 billion barrels of oil have been discovered in Uganda showing the unlocked potential of the country’s natural energy resources. The new pipeline is expected to have a transport capacity of around 230,000 barrels per day, finally developing the country’s energy export sector.
Ugandan President Museveni explained that "This pipeline could turn out to be a very important project that could serve the entire region in the long term. We could build a return pipeline to carry gas from Tanzania to Uganda and the entire region".
The hope is for the pipeline’s reach to expand beyond Tanzania to provide energy to South Sudan and the Democratic Republic of the Congo via the improved oil facilities, which are expected to be developed through the project.
The construction of the immense pipeline is expected to put Uganda on the map as an oil exporter, as well as developing the energy economies of countries across the East African region.
By Felicity Bradstock for Oilprice.com
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