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Thursday, March 31, 2016

Total sticks to Tanga pipeline route as Kenya seeks consensus

The French global energy company Total has reaffirmed its commitment to invest in a crude oil pipeline from Uganda to the Tanzanian port of Tanga, saying it remains more cost-effective than pursuing a Kenyan route instead.
According to Total E & P Uganda general manager Adewale Fayemi, all available options have been evaluated carefully and the conclusion - as far as Total is concerned - is that the Tanga route would still be cheaper and more convenient in the long run.
"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," Fayemi told an East African oil and gas sector conference taking place in Dar es Salaam yesterday.
He said Total, the biggest financier of the 1,400-kilometre pipeline project worth over $4 billion, has done enough studies to compare the various possible routes and come to a definite conclusion about which was best.
The main possible routes considered were from Uganda’s Lake Albert, through northern Kenya to the port of Lamu, or south through Tanzania to Tanga. The Lamu route would cost $4.2bn and the Tanga route $4.7bn, according to estimates. 
But the studies done so far have also noted that the Lamu route would expose the pipeline as an obvious target for sabotage by the Somali-based Al-Shabaab terrorist organization, thereby lowering its safety and security rating considerably.  
Total is partnering with the UK-based Tullow Oil and China National Offshore Oil companies to extract an estimated 6.5 billion barrels of crude oil said to be available in Uganda’s Lake Albert area, of which 1.4 billion barrels have been confirmed as recoverable.
"Initial (crude oil) production will be 230,000 barrels a day," Fayemi told the conference in Dar es Salaam. 
The entire project surrounding the pipeline could see a total investment exceeding $10bn, to include the setting up of an oil refinery, a liquefied gas processing plant, standard gauge railways and several feeder roads.
Ugandan president Yoweri Museveni is reported to have initially signed a memorandum of understanding with his Kenyan counterpart Uhuru Kenyatta for the pipeline project to go through the Lamu port. 
But having weighed the security risk factor posed by Al Shabaab, Museveni apparently changed his mind and signed another MoU with Tanzanian president John Magufuli, paving the way for the pipeline to go through Tanga port. 
This move appears to have caused considerable consternation and anxiety in Nairobi, although the Kenyan representatives at yesterday’s conference seemed to strive to adopt a more conciliatory stance.
Responding to Fayemi’s remarks on the pipeline project, Kenyan delegation leader Daniel Kiptoo - the legal advisor to Kenya’s Cabinet Secretary for Energy and Petroleum - suggested that the best way would be to adopt a regional position to address Nairobi's concerns. 
"Kenya is open to any least cost route available, whatever the case we will go it together as East Africans," Kiptoo told the conference.
He argued that if Uganda and Kenya chose to pursue separate pipeline projects, the whole East African Community (EAC) bloc could end up losing up to $600 million because both countries would bear their own costs.
But he did not elaborate.

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