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Oil route: Uganda chooses Tanzania

Oil pipeline route options

The oil pipeline route puzzle has been solved, with Uganda choosing to export her crude oil to the East African coast through Tanzania and not Kenya, The Observer can reveal.

Uganda’s position is contained in a draft report dated April 11, 2016, a copy of which this newspaper has seen. The report will be presented to the presidents of Tanzania, Uganda and Kenya when they meet on Wednesday in Kampala.

This development all but ends Kenya’s fight to have the oil pipeline go through the Turkana area to Lamu port.

“The comprehensive analysis of the different options [routes], studies and due diligence results has been completed,” said the technocrats in report. “The Kabaale-Tanga route is the only option to secure first oil export by mid 2020, with pipeline availability of 99 per cent.”

The report says that on the Kabaale-Lamu route, the first oil export could only happen in mid-2022, with the pipeline availability at 80 per cent.

“GOU firmly concludes that Kabaale-Tanga (Tanzania) route is the least cost route for the transportation of crude oil from the region to the East African coast.”

The report was compiled by a team of technocrats in Uganda, led by Ernest Rubondo, the commissioner for petroleum exploration and production. The Observer understands that Kenyan and Tanzanian officials presented their positions touting the advantages of their respective routes.

Last October, Uganda and Tanzania signed an agreement to explore the possibility of building a crude oil pipeline between the two countries, setting the stage for fierce competition from Kenya, which thought it already agreed a deal with Kampala.

The competing options are the Kabaale-Lokichar-Lamu port (Kenyan) route, and the Kabaale-Tanga port (Tanzanian) route. Kenya is pushing for the once-preferred Lamu pipeline route, which goes through its oil-rich Turkana region.

On the other side, Tanzania insists there is no better route than through Tanga port. UK’s Tullow Oil favours the route through Kenya to Lamu for its interests in the Turkana area, where Kenya has discovered about 600m barrels of oil.

Uganda has 6.5 billion barrels of oil, with between 1.2 and 1.7bn barrels recoverable. France’s Total E&P favours the Tanzania route. It argues that it is cost-effective and does not have the security threat that the northern Kenyan route poses.

A meeting last month in Nairobi, attended by President Museveni and Kenya’s Uhuru Kenyatta, and representatives of the oil firms Tullow and Total E&P, resolved to set up a group of technocrats to assess both routes and report in two weeks’ time.

The presidents said they would go with “a least-cost option for a regional pipeline” and address the “constructability issues along the route to be chosen.”

Now the latest report seems to put everything to rest, recommending the Kabaale-Tanga port in Tanzania. The experts report says the Tanga route is the least cost option for transporting crude oil to the East African coast; it presents the highest availability; presents the lowest environmental foot print and that it is the shortest schedule to deliver first oil export by mid-2020.

LAMU VS TANGA

According to the report, the Lamu port still has a lot of problems and the attendant costs would be enormous for the parties involved. First, the port is exposed to the south east waves over the banks, with the surrounding islands of Lamu, Manda, Mwamba, Chongoi and Pate unable to shelter it.

On the other side, Pemba Island shelters Tanga bay from the South East monsoon, reducing the wave heights to less than 1 meter. The wave heights reach 3.5 meters off Lamu during the monsoon season, the report says.

There are also strong winds at Lamu, averaging about 380 hours (16 days) annually between 1999 and 2010. This means the countries would incur an annual average export shutdown due to wind estimated at 4.5per cent.

“Additional crude storage volume will be required to avoid upstream production shutdown,” the report reads further.

In Tanga, assessment of the same period showed that it has only 12 hours (0.5 days) of wind annually, with export shutdown estimated at just 0.15%, requiring no mitigation measures.

Kenya has land issues, the report found. Assessing from past experiences, the report said it found that it took Kenya more than two years to compensate people and pave way for a particular development project.

It took Tanzania only nine months to have land free for development, giving Dar es Salaam an upper hand over Nairobi.

DREDGING

The Lamu port needs combing, which could cost millions of dollars. For instance, the outer channel has a dredging thickness of 2-6m; the berthing area has 6-12m; also, as indicated by a study by Japanese port consultants, the material to be dredged in the channel is pure rock.

“Based on the Mombasa experience, dredging schedule in Lamu is not compatible with the Ugandan crude oil pipeline project schedule,” said the report, putting the cleaning cost at between $800m and $1bn. “There are no dredging needed in Tanga and no cost needed.”

On environment, Lamu port is described as having “major environmental constraints, with rich ecological and cultural diversity”.

Some of them are recognized by Unesco. It has coral reefs in the heart of Manda bay; endemic and unique mangrove trees; also important for fish breeding. On the one hand, Tanga route avoids the Coelacanth marine park and has minor impact on biodiversity area, the report concludes.

BEHIND SCHEDULE

Importantly, the report says, the Lamu port development schedule is not compatible with the pipeline project time frame. The contract for its construction was signed in 2013, but as of March 2016, after two years, only the construction camp is partially built, the report says.

For Tanga, there will be no delays to start importing materials for the pipeline and upstream projects as the port is already operational. There are existing roads and railways and available land for marine terminal and yards. 

Early this year, Total announced that it had already secured about $4bn to construct the route through Tanzania. There is no certain source of finance for the route through Kenya.

Last month, the Kenyan media reported that Nairobi’s position is that if their route is rejected, they would go ahead and build their own oil pipeline. An official at the African Development bank (AfDB) in Kenya told Reuters that they would arrange to raise funds to finance the pipeline.

Kenyan energy principal secretary Joseph Njoroge told Bloomberg News last month:”Whatever the outcome, we will build an oil pipeline, whether we are together with the Ugandans or not.”

But according to our source, Kenyan energy officials spent the whole of last week in Uganda trying to lobby their counterparts here to change their position and favour Kenya. As this report indicates, Uganda chose Tanzania.

ISSUES

Hoima-Lokichar-Lamu route

- Traverses ecologically sensitive and fragile ecosystems
- Wildlife protected areas – 167km, including the Bokora
- Fragile ecosystem north of L. Kyoga.
- Nile crossing-significant—requires directional drilling, large working camps needed to be installed on the shores (both sides) of the river.
- Terminal and export facilities at Lamu

Highs

HOIMA-TANGA ROUTE

- Flat terrain, with over 1239kms of flat/leveled and dry terrains
- No slope over 15 degrees
- Low ruggedness
- No internationally protected areas
- No national parks crossed by the route
- Pipeline will only cross the Biharamulo game reserve (33kms)

amwesigwa@observer.ug

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