Uganda could pick Tanzania over Kenya for oil pipeline, says official

Uganda's government is still considering a pipeline through Tanzania to export oil if it proves cheaper than alternatives, an official said yesterday, even though the Ugandan president indicated last month that a route through Kenya had been picked.

Ugandan President Yoweri Museveni and Kenya's Uhuru Kenyatta made a joint call in August to implement a pipeline project via north Kenya "without further delay", a decision seen as helping investors decide on oilfield development in both states.

Some of the Kenya Pipeline Company underground 20inch multi-product oil pipeline at Kokotoni village along the Mombasa-Nairobi highway awaiting to be installed on July 15, 2015. Kenya Pipeline Company will today sign a historic agreement with consortium of banks to finance the construction of the pipeline which will be reliable, cost effective and safe mans of transporting refined petrolium products.

(PHOTO: GIDEON MAUNDU/STANDARD)

But France's Total, an investor in Uganda, raised new uncertainty about that route on Tuesday, saying it was looking at a possible Tanzanian option.

Asked whether the government was still considering the Tanzanian route as an alternative to Kenya's Lamu region, senior Ugandan energy ministry official Robert Kasande said: "We've talked about the northern Lamu route. However, in order to ensure that we have least cost ... we're also looking at the one that terminates at Tanga in Tanzania."

"We will take the one which is cheaper and if it is the one to Tanga, we will take the one to Tanga," said Kasande, director of downstream at the ministry, speaking on the sidelines of an oil and gas conference in Kampala.

The joint presidential statement on the Lamu route in August had said Kenya would need to guarantee security, financing and cheaper fees than other routes, but it had indicated that both leaders were now committed to that option.

The Kenyan route has raised some industry concerns because it would run in a region near the border with Somalia, from where Islamist militants have launched attacks on Kenya before.

Uganda's presidential spokesman and Kenyan energy officials were not immediately available for comment.

China's CNOOC is also investing in Uganda, while Britain's Tullow Oil has a stake there and is developing Kenyan fields with partner Africa Oil.

It's estimated that the pipeline project capital cost stood at at $4,690,628,665 (Sh462 billion), while the annual operating expenditure will be about $131,490,122 (Sh12.95 billion). The construction costs have significantly shot up from the $4 billion from earlier estimates, with the appreciation of the dollar against the East African currencies piling up the costs after translation to the home units.

The crude oil from Uganda and Kenya and later South Sudan shall be blended and transported through the planned pipeline system. Other technical details on capacity show that the design throughput is 300,000 barrels of crude oil per day, made up of 200,000 barrels from Uganda and 100,000 from Kenya.