Total E&P Uganda has confirmed its
commitment to construct the $4 billion crude oil pipeline through Tanga regardless
of ongoing discussions between Kenya and Uganda to have it pass through the
Kenyan route. The affirmation was made by Totals general manager Adewale Fayemi
who said "As a company, our position remains that we are going through
Tanga. I understand there are issues being discussed but our position remains
the same,” This was said at the two-day East Africa Oil and Gas conference in
Tanzania.
Mr. Fayemi added that all available
options have been carefully considered and the firm is more interested in the
Tanga route, which it considered cheaper for oil production.
Total is the main financier of the crude oil
operations in Uganda despite being in partnership with Tullow and China
National Offshore Oil Companies (CNOOC) and its decision carries more weight. The
three firms are forecasting production of an estimated 6.5 billion barrels of
Uganda's crude oil by 2018.
There are two possible routes that could
be explored by Kenya and Uganda in construction of the crude oil pipeline.
These are the southern route through Nairobi from Uganda to Mombasa and the
northern one through Hoima, Lokichar Lamu. The other alternative is the Uganda
Tanzania route from the Albertine basin in Western Uganda to Tanga.
Both Kenya and Tanzania
boast of established ports, although Kenya is banking on its longstanding
relationship with Uganda in terms of transporting goods to the landlocked
country. In addition, Tullow which holds a major stake in the Kenyan oil fields
favours the Hoima-Lokichar-Lamu route. And the positive results observed in Kerio valley give more reason for Kenya to
clamour for the pipeline to pass through this route. Tanzania on the other hand
boasts that the Tanga is closer to the Uganda oilfields than Lamu. It also
holds that the construction would be cheaper along the route because of the
gentle terrain compared with the escarpments in Kenya. Furthermore, besides security
concerns, Uganda is concerned with the LAPSSET project falling behind schedule.
This gives Tanzania an advantage because
the Tanga port is already built.
However,
Kenya’s Energy Principal Secretary, Joseph Njoroge believed that if all fails,
Kenya could go it alone on the crude oil pipeline; "We will build an oil
pipeline, whether we are together with the Ugandans or not."
Total's stance on the issue
comes as Kenya’s President Uhuru Kenyatta considers negotiating for the Lamu
route through his host President François Hollande during his upcoming trip to
France this month.
At the moment, Kenyan and
Ugandan officials are touring Lamu and Lokichar, following a decision by
President Kenyatta and Uganda's Yoweri Museveni to have all possible routes
reviewed and harmonised. The team is examining the terrain, technical and
economic aspects of three possible routes through Tanga in Tanzania, Lamu or
Mombasa port in Kenya.
Total’s current stand on the pipeline
could water down a meeting by Presidents Kenyatta and Museveni set for the
coming week given that total is the major financier in Uganda’s crude oil operations.
Tanzania has this week joined Kenya and Uganda in the search for a least
cost option for a pipeline that will take crude oil from East Africa to export
markets and allow its natural gas to be exported to neighbouring countries. It
is participating in the discussions as this is also a strategic business opportunity
for Tanzania. Kenya's Energy and Petroleum Principal Secretary Andrew Kamau
said in a statement "Both Uganda and Kenya are in need of gas and the gas
through the two countries from Tanzania will be beneficial. However this will
depend on Tanzania's decision,"
The fourth alternative that can be taken into consideration would
include Kenya abandoning the quest for a pipeline to Lamu and instead linking
the Turkana oil fields to Hoima in Uganda from where crude oil will flow into
the Uganda pipeline enroute to Tanga. This alternative however will be a major
blow to Kenya’s LAPSSET project.
Total’s affirmation comes after an
announcement by Tanzania Petroleum Development Corporation (TPDC) Executive
Director James Mataragio, that France had readied $4 billion to begin
construction of the pipeline by August and have it completed in two years.
Kenya ‘s Cabinet secretary
for Energy and Petroleum responded to Total, noting that Kenya's concerns on
the crude oil pipeline would be addressed within the EAC.
When all's said and done the decision
on the crude oil pipeline route is key for Tullow Oil Plc, Africa Oil
Corporation and Maersk Oil to make final investment decisions (FID) on South
Lokichar basin.
According to Global Data's upstream analyst Jonathan Markham even though
the discoveries in the two countries are above the volume threshold for commercial
development without an economical export route, the inland discoveries will
remain commercially impracticable at today's prices.
The Capex on upstream projects over the next 10 years is forecasted to
be around $7 billion in Uganda and $3 billion in Kenya once exploration firms are
allowed to move to production.
Source: All Africa, allafrica
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