The Democratic Republic of Congo (DRC) is interested in Uganda’s crude oil pipeline project, and is willing to participate in its development, Uganda’s energy minister has said.
Irene Muloni said during the announcement of a launch of a front end engineering design (Feed) study for the pipeline at the ministry of energy, Kampala, on Monday: “DRC has shown willingness to participate and have come up openly to support.”
Muloni added: “This is a potential route [for them] to access the international market.”
DRC has oil reserves in the Virunga national park and Lake Albert, which it shares with Uganda. The DRC’s attempt to embark on oil exploration in the Virunga park has, however, attracted condemnation from environmentalists.
Tullow Oil was one of the exploring firms there. In October, DRC signed a pact with Tanzania for joint exploration of oil and gas in Lake Tanganyika. Tanzania and DRC own majority of the lake with 46 per cent and 40 per cent respectively.
If Uganda and DRC reach a deal to use the same pipeline, the latter will have to pay fees to Uganda. It will cost at least $12 per barrel to transport to Tanga, according to Muloni.
Uganda announced in May last year that it would export its crude oil through a pipeline to Tanga rather than Lamu, Kenya. If DRC chooses to develop its oil reserves, the Ugandan route would be a viable option for it to export its resources.
Meanwhile, the Feed study will cost Uganda and Tanzania at least $11.5m, according to the ministry of Energy and Mineral Development. It will be done by Gulf Interstate Engineering from Houston, Texas, USA. Muloni said the study, which will survey the entire 1,445km route, is “expected to determine the actual cost of the project.”
It would also define the scope of financing and internal funding requirements. Muloni said they had adopted a fast-track mode and that the study would only take eight months to pave way for construction and be ready by 2020 for full production. She said the environmental impact assessment would be done concurrently with the Feed study, and it would take at least six months.
The $3.5 billion 24-inch diameter pipeline is expected to transport 200,000 barrels of crude oil per day to Tanga when completed. The crude oil export pipeline will be connected to a central processing facility in the production areas in Hoima.
Muloni said that in the next three years, at least $8bn is expected to be invested in the country – particularly for the pipeline and refinery. The country is, however, yet to get a contractor for the refinery after a Russian consortium pulled out at the eleventh hour.
At least 160,000 jobs are to be created from the oil industry. Muloni said a special-purpose vehicle for the East African crude pipeline is to be formed. She said Uganda, Tanzania, Tullow oil, Total, and Cnooc are expected to participate in owning shares. She said the amount of shares are not yet known but by the end of the study, each party will have known how to participate.
In a statement to parliament in December, Muloni said negotiations of an intergovernmental agreement (IGA) with the Tanzania government was progressing well and was to be completed in January 2017. It will be submitted to Parliament since it is a treaty which will require ratification.
She added that government was procuring advisory services for legal, financial and a commercial aspect of the project. The award of the contract is expected in February 2017.
Also, she said in the report, a resettlement action plan for the pipeline corridor is planned to commence this month. Engagements with local and political leaders are planned to start in January 2017 to ensure acceptance of the project.
Muloni also informed the House that Uganda’s investment in the project is yet to be finalised.
“A Cabinet memorandum on the development of pipelines and infrastructure requirements in Uganda has been sent to the ministry of finance for consideration and issuance of a certificate of financial implications, prior to its submission to Cabinet,” she said.
Tanzanian energy minister Sospeter Muhongo said there were already institutions interested in buying shares in the pipeline. He said “they (Tanzania government) did not have issues with land” that is needed for the project.