Uganda Will Route Oil Pipeline Via Tanzania Instead of Kenya

  • Decision a blow to Kenya, which will instead build own link
  • Tanzania to invest in Uganda refinery, minister says

Uganda decided to route a multibillion-dollar crude-export pipeline through Tanzania, forcing neighboring Kenya to develop a separate link to transport its own oil.

A pipeline will run from the western region of Hoima to the Tanzanian port of Tanga, Uganda Foreign Affairs Minister Sam Kutesa said on Saturday after a summit of regional leaders in the nation’s capital, Kampala. Kenya will build a link between the towns of Lokichar and Lamu, he said.

Sam Kutesa
Sam Kutesa
Photographer: Photo by Luiz Rampelotto/Pacific Press/LightRocket via Getty Images

Tanzania has been competing with neighboring Kenya for the cross-border pipeline, which will tap Ugandan oil deposits being developed by France’s Total SA, China National Offshore Oil Corp. and London-based Tullow Oil Plc. Total said in December it would prefer to transport crude via Tanzania, while Tullow has favored the Kenyan route.

“While we have always believed that a joint Uganda-Kenya export pipeline was the most cost-effective option, we are clear that both Uganda and Kenya’s oil resources can be developed separately,” George Cazenove, a spokesman for Tullow, said on Saturday in an e-mail. The company will work with Uganda, Kenya and its partners to advance projects in both countries, he said.

A feasibility study for the Kenyan option by Nagoya, Japan-based Toyota Tsusho Corp. estimated the cost of the project at as much as $5 billion. Routing the pipeline through Tanzania would cost about $4 billion, according to state-owned Tanzania Petroleum Development Corp.

Tanzania will invest in Uganda’s planned 60,000 barrels-of-oil-a-day refinery, Kutesa said, without providing further details. Uganda is negotiating with Russia’s RT Global Resources over construction of the facility, according to Uganda’s Energy Ministry.

Kenya wanted the pipeline to link up with the Lamu Port Southern Sudan-Ethiopia Transport corridor, a proposed $26 billion project known as Lapsset that will include a port and a railway. It would be routed through Kenya’s arid northern Lokichar basin, which has been prone to attacks by bandits and cattle rustlers, to the coastal town of Lamu. The area is close to Somalia, where Islamist militants have waged an insurgency against the government for the past decade as well as carrying out raids inside Kenya.

Reserves in Kenya, which plans to start exporting crude as early as 2020, don’t currently support government plans to build its own pipeline, according to Jacques Nel, senior economist at NKC African Economists in Paarl, South Africa.

“Kenya will not get as much from the oil, will get less per barrel if it builds its own pipeline,” Nel said before the agreement between Uganda and Tanzania was announced.

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