Overblog Follow this blog
Edit post Administration Create my blog

President Uhuru Kenyatta is usually a very jolly man, but at the 13th Northern Corridor Infrastructure Summit held at the weekend in Kampala, Uganda, he appeared to be the opposite of his usual self.

Days to the summit it had been concluded, and perhaps he had even been briefed early enough, that Uganda had chosen the southern route through Tanzania for the proposed multi-billion-dollar crude oil export pipeline.

With an election not so far away, according to insider accounts, President Kenyatta had hoped for his country to snap up the deal via the Northern route to the Lamu port at the Indian Ocean. The project starting in a pre-election year meant investments, jobs and other associated benefits — which undoubtedly would go to his government’s credit.

Ugandan technocrats, however, knew clearly and very early enough, after several feasibility studies, that nothing worked in Kenya’s favour. President Museveni, a close ally of Mr Kenyatta, had been briefed several times on the odds between the Northern and Southern routes.

But how to eliminate Kenya cautiously, a long-standing bilateral partner, from the equation is why the final position had to be subjected to re-inspections of routes, feasibility studies and back-and-forth meetings. In the final technical report, a copy seen by this newspaper, Ugandan technocrats from the Petroleum Directorate in the Ministry of Energy maintained that the southern route to Tanga port at the Indian Ocean was the “least-cost option”.

According to the report, Lamu lost out on all grounds of comparisons, costing it the lucrative pipeline deal.

The Japanese engineering consultancy firm Toyota Tsusho Corporation (TTC) had recommended Lamu in a feasibility report submitted to the two governments in 2014. TTC had cited the need to tap into the already existing economies of scale between Uganda and Kenya, and further to tap into the benefits of the $25 billion (Sh2.5 trillion) Lapsett infrastructure corridor — the ambitious corridor conceived by Kenya, Ethiopia and South Sudan.

French oil giant Total SA, parent company of Uganda’s Total E&P and one of the three International Oil Companies (IOC) licensed to operate in Uganda, opposed this route from the start, not only for security concerns — Lamu port borders Somalia, where Al-Shabaab militias operate — but also the rough terrain, with slopes above 25 degrees.

Total contracted the US-based Gulf Interstate Engineering to undertake a feasibility study on the alternative Tanga route. The engineers found the new route more viable and less challenging to get oil from Uganda to the international market.

KENYA COMPLICATED MATTER BY WASTING TIME

Insiders also recounted that when, in August last year, Presidents Museveni and Kenyatta signed the first memorandum of understanding to build a pipeline from Hoima to Lamu, Kenya complicated the matter by wasting the already lost time in arguments over the preconditions Uganda had set — such as guaranteeing security, upfront financing, and tariffs not higher than offered by the alternative.

While this was a heads of state decision, the technocrats had already put their feet down for Tanga.

In October the same year, when Uganda signed another MoU with Tanzania, the Kenyans were awakened, quickly returning to the drawing board and expressing interest in revitalising discussions to court Uganda for the deal.

After months of deliberations, the Ugandan team met with both the Kenyan and Tanzanian teams, and later the Ugandan officials met with top authorities of Total, who in fact promised to source financing for the project. At this stage it became clear Kenya had lost out on the deal.

In March this year President Museveni met Tanzanian President John Magufuli at the 17th Ordinary East African Community (EAC) summit, and the two sealed the deal for the project. Two weeks later President Magufuli met the Total SA vice president for East Africa Javier Rielo, and the two agreed the company would start construction of the 1,410-kilometre pipeline “as soon as possible”.

A week later President Kenyatta called upon President Museveni to salvage the deal, and much as the two tasked technical teams from both countries, and Tanzania, to go back to the drawing board and even to consider the route to Mombasa, it was late.

As the regional heads of state convened in Kampala on Saturday, the final position on the matter had been concluded — that Uganda will construct its pipeline to Tanga.

“There is no more paralysis on that matter, we are now moving,” President Museveni remarked at the end of the meeting.

“I have agreed with President Kenyatta that we should let the two pipelines go ahead, one from Lokichar to Lamu and another from Hoima to Tanga,” he added. It was also agreed that Kenya would construct its own pipeline from its Lockicahr oil belt to Lamu.

Kenya recently announced discovery of 600 million barrels of oil but the reserves are yet to be appraised as economically viable. On the other hand Uganda’s current volume of oil stands at 6.5 billion barrels.

'MAJOR MILESTONE'

Reacting to the decision, the Total E&P Uganda corporate affairs director, Ahlem Friga-Noy, in a statement described the development as a “major milestone towards the development and the production of Ugandan resources”.

“We commend the thorough work conducted by the Government of Uganda in the process of analysing and selecting the best route to transport the Ugandan oil and to ensure the maximisation of its value,” he said.

A day before the Saturday summit, President Museveni met a delegation from Total led by the Africa director for exploration and production Guy Maurice and the Uganda business general manager Adewale Fayemi, where they discussed how to go forward with the Tanga pipeline.

Tullow Oil [Uganda] general manager Jimmy Mugerwa, said: “While we have always believed that a joint Uganda-Kenya export pipeline was the most cost-effective option, we are clear that both Uganda and Kenya’s oil resources can be developed separately. We will now work with both the government of Uganda and our joint ventures partners CNOOC and Total on further moving the Uganda project towards development.”

How Kenya lost Uganda pipeline deal
Tag(s) : #Analysis
--> Flag Counter