Uganda, Tanzania sign deal to build $3.55 billion oil pipeline

Uganda and Tanzania on Friday signed an agreement which gives a legal framework to the construction of the East African Crude Oil Pipeline (EACOP).

At the signing here, both countries argued that the Inter-Governmental Agreement (IGA) sets the foundation for the setting up of other legal instruments towards the management of the oil pipeline that will link Uganda’s oil wells to the Tanzanian seaport of Tanga.

The signing of the IGA came days after the leaders of the Ugandan President Yoweri Museveni and Tanzanian President John Magufuli signed a communique signaling the end of the year-long negotiations and a go ahead to start the construction.

Construction of the 1,445-km oil pipeline is expected to start towards the end of this year and will last up to 2020. The first drop of crude oil is expected the other side of the pipeline by the end of 2020, according to goals set by both governments.

The 3.55-billion-U.S.-dollar pipeline will be the longest electrically heated pipeline in the world. It is heated because of the waxy nature of Uganda’s oil. Uganda has so far discovered over 6.5 billion barrels of oil.

Experts argue that during and after the construction of the pipeline, the two countries and the entire East African region stand to reap benefits from the project.

Palamagamba Kabudi, Tanzania’s Minister of Constitutional and Legal affairs, said implementation of EACOP would open up the region for further opportunities for trade and in turn fast track socio-economic development.

He was speaking after the signing of the IGA with Irene Muloni, Uganda’s minister of Energy and Mineral Development.

Kabudi said apart from increased tax revenue, there will be new infrastructure development, promotion of economic activities along the pipeline route and promotion of petroleum exploration activity in areas near the pipeline.

Uganda, according to ministry of finance figures, has planned to spend over 900 million dollars on construction of roads and an international airport in the oil wells area in the western part of the country.

Adewale Fayemi, General Manager Total E&P Uganda, argued that the EACOP has the potential to open a new era in East Africa.

“With an estimated cost of 3.55 billion dollars, it will significantly contribute to increasing the foreign direct investment per year by over 60 percent in the two countries during the construction phase,” Fayemi said.

“It will trigger important economic growth. It will increase links and enhance business between East African countries through the corridor being opened,” he added.

During the construction stage, according to official figures, over 10,000 jobs would be created, boosting the income of the households along the pipeline.

Stephen Isabalija, permanent secretary at Uganda’s ministry of energy, argued that the private sector should position itself to take advantage of the mass opportunities that include skills development, technology transfer, and provision of goods and services.

Elly Karuhanga, Chairman of Uganda Chamber of Mines and Petroleum, an organization that seeks to promote and develop Uganda’s mining and petroleum operations, argued that while there are all these opportunities for the private sector to take, the have to drastically improve their standards.

He argued that oil companies have very high standards which the private sector must conform to if they are to provide goods and services.