Background

In 2006, commercial quantities of oil were confirmed to exist in the Lake Albert in Uganda. The oil companies in Uganda, CNOOC LTD, TOTAL and TULLOW PLC completed the exploration phase and are now headed into development, which will consequently lead to the production of Uganda’s oil resources. once produced, the crude oil will be partly refined in Uganda to supply the local market and partly exported to the international market. The export to the international market will be through an export crude oil pipeline.

In May 2017, the governments of the Republic of Uganda and Unites Republic of Tanzania sign the Inter-Govermental Agreement(IGA) for the East African Crude Oil Pipeline Project(EACOP), the signing of the IGA is a significant milestone for the project. Tanzania offered Uganda tax relief, a 20-year tax holiday and a free right of way to construct the pipeline in order to secure the deal. Tanzania will receive a transit fee of US$12.20 per barrel.

The construction of the pipeline will export Ugandan crude oil to the international market, that will open up the entire East African region and provide further opportunities for trade and socio-economic development.

Brief Introduction

The EACOP is a 1445km crude oil pipeline that transport Uganda’s crude oil from Hoima in Uganda to the Chongoleani peninsula near Tanga port in Tanzania. In Uganda, the pipeline 296km long, will traverse 8 districts and 24 sub-counties; in Tanzania, the pipeline 1149km long, will traverse 8 regions and 24 districts. 

The EACOP will cost an estimated US$3.5 billion and be the longest heated pipeline in the world, necessary to ensure the flow of Uganda’s waxy crude, the pipeline will on completion carry 216000 barrels of crude oil for export daily.

Current rights and interests

The project is to be financed with debt. The Uganda national Oil company(UNOC), the Tanzania Petroluem Development Corporation(TPDC) and three oil companies(CNOOC LTD, TOTAL and TULLOW PLC) are the shareholders of the project, they are going to form a unitary company called the East African Crude Oil Company and agree on the shareholding of how much each partner is going to take in terms of the total profits and also ensure proper reinvestment in the project. 

Expected workload

Now, a USA based firm, Gulf Interstate Engineering (GIE) has finished the Front-End Engineering Design (FEED) study for the East African pipeline project. Construction of the 1445km 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.

Here are the key requirements for the next steps of the projects:

(1)Establishment of a pipeline company to run and operate EACOP project;

(2)Negotiation of Host government Agreements (HGA) between the pipeline company and the government of Tanzania and Uganda;

(3) Development of shareholders agreement;

(4)Project Financing;

(5)Start Engineering, Procurement and Construction;

The pipeline construction will begin once the Final Investment Decision(FID) is reached.