The East Africa Crude Oil Pipeline (EACOP) will exploit 6.5 billion barrels of oil which is 40 percent of the total oil in the Albertine oil zone, President Museveni has revealed.
“The oil will be explored from the area covering 40 per cent of the total area that has been discovered to have that natural wealth,” said Museveni, adding, “We have decided to start with it since it’s just the new area of investment.”
The President, who was previously opposed to the export of crude oil in favour of a refinery, said the remaining 60% of Albertine oil region will be developed later.
“Since it’s a new area, we decided to use the small area from where we will also be able to learn more for the sake of doing better in the next project,” he said.
Museveni spoke during the signing of the Intergovernmental Agreement (IGA) between Uganda and Tanzania in Chato, Geita region, Northern Tanzania.
The Ministers of Energy for Uganda and Tanzania, Hon. Mary Goretti Kitutu and Hon. Medard Kalemani respectively, jointly signed the Agreement.
President Museveni revealed that there had been long debates and negotiations between Uganda and other stakeholders on the amount of tax and other expenses, which delayed the commencement of the project.
To allow the timely commencement of the project, President Museveni said that Uganda had to forego a total of 800m US dollar revenue that was to be collected from the project for the next 25 years.
The agreement on the pipeline construction came a few days after the government of Uganda and Total concluded and signed the Host Government Agreement (HGA) for the East Africa Crude Oil Pipeline (EACOP) project on 11th September 2020.
After the signing of the HGA, President Museveni promised to get in touch with his Tanzanian counterpart, Dr John Magufuli, to resolve other pending issues, especially concluding the Host Government Agreement in Tanzania, hence his one day working visit to Tanzania.
The agreement signed in Chato cleared the way for the construction of 1,445km long Pipeline that will transport crude oil from Uganda’s oil fields in Hoima, to the Port of Tanga.
Uganda and Tanzania agreed on a 40:60 profit sharing formula, a consensus realized on the basis of 70 per cent of the pipeline running through Tanzania’s territory.
The Tanzanians had insisted on the 80:20 profit sharing ratio with Uganda, a suggestion President Museveni rejected for many years.
Insiders say Museveni is keen on pushing for a refinery to add value to the crude oil in the 60% of the Albertine region.
The planned refinery will produce Liquefied Petroleum Gas (LPG), diesel, petrol, kerosene, jet fuel and Heavy Fuel Oil (HFO).
In Tanzania yesterday, President Museveni, the project will also make fuel cheaper hence fostering the aviation industry, whereby regional airlines will get cheaper jet fuel.
Uganda’s demand for petroleum products between 2012 and 2017 grew at nearly 9 percent per annum.
This implies by the time the refinery is commissioned, Uganda’s demand for petroleum products is expected to lie between 58,000 and 65,000 bopd assuming annual growth rates in the range of 7 to 9 percent, respectively.
In 2030, domestic demand is expected to lie between 87,000 and 111,000 bopd, while in 2045 the domestic demand is projected to lie between 240,000 and 400,000 bopd; assuming no interruptions in demand growth.
Officials say the high cost of importing petroleum products into Uganda and the high cost of exporting surplus products out of Uganda to international markets means that there is a strong incentive to have a refinery that matches regional demand.
The refinery would target Uganda, South Sudan, Eastern DRC, Rwanda, Burundi, Northern Tanzania and potentially western Kenya as a possible market.
Government recently granted the lead investor, the Albertine Graben Refinery Consortium – which comprises Saipem SPA, Nuovo Pignone International SRL, Yaatra Africa and Lionworks Group Limited – more time to complete the ESIA studies and the Front-End Engineering Design of the refinery project.
The consortium is expected to sign a final investment decision for the 60,000 barrels per day refinery, which has an estimated worth of $3 to $4 billion, in 2022.
In his remarks, President John Pombe Magufuli revealed that Tanzania will earn Shillings 7.5trillion and create more than 15,000 jobs over the next 25 years, or more from the project.
President Magufuli said that the project implementation will open up the region for further opportunities for trade and in turn fast track socio-economic development.
He commended President Museveni, the Government and people of Uganda for working closely together to have this project reach this stage.
The Tanga route, according to feasibility studies, was deemed the cheapest for Uganda to transport its oil from the production point in Hoima to the international market. It has a convenient flat terrain, not interrupted by other activities, as well as lowest environmental challenges.
According to a joint communique read out by the Tanzanian Attorney general Adelardus Kilangi, the President of Uganda and the President of Tanzania agreed and directed that each state party expeditiously concludes the Host Government Agreement with the EACOP project company.