08-03-09 The East Africa Community (EAC) has unveiled a plan that will see two major oil pipelines constructed to supply imported oil and natural gas to energy-hungry Great Lakes landlocked countries.
The construction of the pipelines to be carried out under the auspices of the EA trading block will start from Dar-es-Salaam and Mombasa ports in Tanzania and Kenya respectively.

The multi-million-dollar projects are expected to reduce the high road and rail transportation costs of oil from Kenya and Tanzania to landlocked Burundi, Eastern DR Congo, Rwanda, South Sudan and Uganda.
EAC Heads of the states summit Chairman President Paul Kagame of Rwanda said recently: "I am pleased to note that the oil pipeline extension from Eldoret to Kampala is ongoing, and will be completed by the fourth quarter of 2009."

Kagame who was briefing the East African Legislative Assembly (EALA) added that the terms of reference for feasibility study on the extension of a similar oil pipeline from Kampala-Uganda to Kigali-Rwanda and Bujumbura-Burundi had been finalised.
"Similarly, the terms of reference for feasibility study for the Dar-es-Salaam-Tanga-Mombasa natural gas pipeline have been completed and approved by the EAC Sectoral Council on Energy," he said.

As part of the deal, the EAC partner states have agreed to share Tanzania's Songo-Songo gas and the construction cost of a pipeline through Tanga to Mombasa, Kenya and later on to Kampala for distribution of the gas for power generation in the partner states.
Meanwhile, the Director for the EAC's Productive and Social Sector, Dr Nyamajeje Weggoro, said a similar arrangement would apply to supplying within the region the recently discovered oil in Western Uganda. A 320 km Eldoret-Kampala pipeline is under way to distribute the resource to the partner states, he pointed out.

During 12 months ending February 2008, Tanzania's oil bill amounted to $ 1.46 bn compared with the country's total import value of $ 5.53 bn, according to the Bank of Tanzania (BoT).
Construction of the 320 km-Eldoret-Kampala-oil pipeline takes off in April after land was acquired 15 miles west of Kampala along the Kampala-Mityana highway to serve as the pipeline's inland terminal. Trucks will pick oil products from there for delivery to Burundi, Eastern Congo, Rwanda and Southern Sudan.

Project details show that Tamoil East Africa, the company that won the tender in 2006 to build, own, operate and eventually transfer the project to the Kenyan and Ugandan governments after a period of 20 years, will build the terminal.
Tamoil is a subsidiary of a Libyan giant that has a wide range of expertise in the oil business, including oil products distribution, oil engineering and refining. Tamoil officials recently said the 24-tank terminal will hold up to 160 mm litres of fuel-enough to meet the needs of the Kenya, Uganda and Tanzania, including possible supplies to Eastern Congo and Sudan for at least 21 days, in case of supply disruptions.

Ahmed El Gembri is the Project Manager who has said the venture will be completed in 15 months. The project coincides with Uganda starting to extract its own oil from the Lake Albert area, and experts say the country will need a pipeline to move its refined product to the export market.
The Eldoret-Kampala line is a "reverse engineering" design, which means it serves a duo-purpose of transporting oil products to and fro. The project cost notwithstanding, pipelines are the cheapest modes of transporting oil products, which at $ 20 per cm that the Tamoil quotes, is nearly half the current tariff of between $ 30 and $ 40 per 1000 litres that oil importers foot using other means.

For many, the construction of the topping plant, which would have a processing capacity of 4,000 bpd and the possible later development of a larger refinery will most likely result in Uganda, reducing its petroleum imports and thus dependence on Kenya's infrastructure. This translates into 156,000 tons of fuel oil and 32,000 tons of white products (like diesel)a year.
The heavy fuel oil will mostly be used in power production. Experts say Uganda's ability to generate cheap oil would translate into cheaper power, which would make it the most competitive destination for manufacturers within the East African trading block.

About 114,000 tons of fuel are transported through road and rail to Uganda, with the landlocked country paying an additional $ 20 per 1,000 litres to ferry the fuel from the coast compared to using the pipeline up to Eldoret and trucking it to Kampala.
Generally, Uganda's fortune will also translate into loss of revenue for the Rift Valley Railways (RVR) and myriad road transporters. Currently, nearly 85 % (714,000 tons) of Uganda's annual petroleum and diesel requirements are imported through Kenya.

Out of this, 600,000 tons are transported primarily via Kenya Pipeline Company (KPC) infrastructures of Mombasa to Nakuru and Eldoret, and then via road transport across the Ugandan border.
This means that KPC will also be another big casualty once Uganda becomes self-sufficient in terms of oil production. Uganda pays the KPC $ 40 for every ton of oil that passes through its facilities. This translates into $ 24 mm in annual revenue to KPC. The money is later transferred to the Government.

Experts have been working to ascertain the amount of reserves Uganda actually has, as the first estimates of the discovery's size indicate it is exhaustible. Estimates of up to 300 mm barrels pale in comparison to the reserves of Nigeria (36 bn barrels) or Angola (more than five bn barrels).
The three fields in western Uganda, where the oil has been discovered, have reserves of between 100 mm and 300 mm barrels, with 30 mm barrels ready for extraction at just more than 12,000 bpd. Australian oil exploration company Hardman Resources, which had been commissioned by the Ugandan Government to prospect for oil in the country discovered the oil in June 2006 in three western fields called Weraga 1, Weraga 2 and Mputa. Before that, oil exploration companies had spent at least $ 70 mm on the search.

The oil find brought Uganda into the continent's oil producing club alongside countries like Nigeria, Equatorial Guinea, Sudan and Chad, although with a lesser production potential. During the announcement, Ugandan media quoted President Yoweri Museveni saying that he expected production to begin this year, with an initial production of 6,000-10,000 bpd.
By comparison, Nigeria, which is Africa's biggest producer of crude, can produce around 2.5 mm bpd, but has seen a drop-off of around 20 % in the past few months because of militant attacks on pipelines and kidnappings of oil workers.

Although Ugandans are happy at the prospect of the country's new resource generating faster growth and creating more jobs, initial reactions from the locals of the region where the oil was discovered is pointing to a direction similar to problems that have been witnessed in oil producing areas in Nigeria. According to various reports from the Uganda media, tribesmen of the Banyoro, whose kingdom area covers where the oil was discovered, started to claim their share of the oil immediately after Museveni's announcement.
Rwanda is also exploring oil prospects. Analysts say when Uganda starts to drill its own oil; it will need an oil pipeline to transport it to the refinery in Mombasa.