Uganda: Oil Firms, Govts Differ On Export Pipeline

Workers in oil production.By Edward Ssekika

As heads of state under the Northern Corridor Integrated Project meet in Kampala next month, one of the key issues on the agenda will be the approval of the crude oil pipeline route from Uganda to an East African seaport, probably Lamu.

In November last year, governments of Kenya and Uganda signed a contract with Japanese firm Toyota Tsusho to conduct a feasibility study that will advise on the appropriate route for the crude oil export pipeline.

Ernest Rubondo, the acting director for the directorate of petroleum in the ministry of Energy, recently revealed that Toyota Tsusho had finalised and submitted its feasibility study report, and it is expected to be tabled and discussed by the heads of state of Uganda, Kenya, Rwanda and South Sudan.

"We expect the heads of state to discuss and approve the route," he said.

Ambassador James Mugume, the permanent secretary in the ministry of Foreign Affairs, said the heads of state from the Northern Corridor Integrated project are scheduled to hold their 10th summit early next month in Kampala. He said one of the outcomes of the Kampala meeting will be the approval of the crude oil pipeline from Uganda to the coast.

PIPELINE ROUTE

The heads of state will have to select one out of the two possible routes. The much-touted route is the one they call the northern, which goes through northern Uganda to north Kenya around the Lokichar basin, up to the port of Lamu. This route is 1,380 kilometers long.

The second option is the route that is expected to run from the oil fields in Hoima through central Kenya to Mombasa.

From the corridors, the northern route is likely to be picked mainly because it fits in well with the Northern Corridor Integrated Infrastructure project. Speaking at the Oil and Gas Convention 2015 at Serena hotel last month, Jimmy Mugerwa, the general manager of Tullow Oil Uganda, said joint venture oil companies preferred the southern route as opposed to the northern route.

"From the joint venture oil companies' perspective, this is the route [southern] we are interested in. We have advised and we shall continue to advise on the most appropriate route," he said, adding that it is up to the regional governments to make a final decision on the route.

However, picking a southern route is likely to affect the position of Kenya and South Sudan under the northern corridor project, something that is expected to pit technical evaluations against geopolitics.

Under the northern corridor, Kenya expects to use the same crude pipeline to export its crude, which has already been discovered in the Turkana area. The northern route is also expected to bring South Sudan on board by exporting its oil through Kenya since it is already facing a lot of challenges with its northern neighbour, Sudan.

Mugerwa said although the oil companies prefer the southern route, it will be up to the heads of state to approve an appropriate route. Asked why the oil companies preferred the southern route ahead of the northern route, Tullow said all routes were viable.

"Without the pipeline, we don't have a project," he said. At least construction of the crude pipeline will require a total of 3,000 people, Mugerwa said.

It will require to be heated at every 30 kilometers because the waxy crude oil found in Uganda and Kenya solidifies at low temperatures. The pipeline will contain a specialised heating system and pump stations along the way to keep the oil flowing. This will require a lot of sophisticated technology. When completed, it will be the longest heated crude pipeline in the world.

Some sources within the industry say if regional governments approve the northern route, it is likely to cause a deadlock since oil companies preferred the southern route.