Uganda and Tanzania have agreed to further fast track their plans for the construction of the $3.5 billion East Africa crude oil project.
The ministers of Energy from the two countries together with their respective attorney generals met for another round of negotiations over the project in Kampala as per the inter-governmental agreement signed between the two governments last year.
The meeting hosted by Uganda's Energy and Mineral Development minister, Irene Muloni was also attended by her Tanzanian counterpart Dr Medard Kalemani.
There was concern raised between the two parties that they seemed to be moving behind the schedule regarding the remaining legal requirements to move the oil project to the next stage.
One of the legal requirements is the need to sign the host government agreement which has been pending since last year even when the two countries have gone ahead to lay the foundation stones for the project.
Tanzania's President Dr John Pombe Joseph Magufuli raised the same issue at the laying foundation stones in Hoima and Kyotera last November.
Sources privy to the meeting told URN that the ministers and their technocrats held a closed-door ministerial meeting at Protea hotel in Kampala.
The parties agreed to have the host government agreement between the two governments signed before the end of June. They reportedly also tasked the joint venture partners to make their financial investment decision (FID) before the close of 2018.
It is not yet clear whether the Uganda Petroleum Authority has studied the front end engineering designs to pave way for the detailed engineering designs. The pipeline will be heated at 50 degrees celsius to keep the waxy crude flowing.
Front end engineering studies for the pipeline were completed last December followed by optimization studies conducted by Total E&P. The optimization study by TOTAL focused on the economic viability of the project. It was also aimed at ensuring that right standards for the pipeline running from Hoima to Port of Tanga in Tanzania.
The optimization study was reportedly completed by a consultant hired by TOTAL but a source close to the meeting, said TOTAL has not released its findings to the other partner CNOOC. Both TOTAL and CNOOC officials were reluctant to comment on the matter when contacted on Friday.
Total E&P Uganda is the lead joint venture partner on the crude oil export pipeline. The pipeline is expected to charge $12.2 for every barrel of crude oil that will be transported in the pipeline, making Uganda's crude oil profitable even at today's rate of $50 per barrel.
The two governments have from the onset required the joint venture partners transport the crude oil at no less than $12.2 per barrel from Hoima to its final destination.
CNOOC has reportedly demanded that TOTAL releases the financial analysis from the optimization study it conducted before CNOOC determines whether or not to announce its final investment decision (FID). The pipeline, is expected to be completed by the year 2020 when the country is scheduled to start oil production.
The funding for the project is expected to be raised will be raised through debt and equity from joint venture partners and national oil companies of Uganda and Tanzania.
Total E&P Uganda, Tanzania and Uganda last year appointed three companies as financial advisors for the pipeline. They included consortium of South African based Standard Bank, Imperial Bank of China (IBC) and Sumitomo Mitsui Banking Corporation Europe Ltd.