November 2024, Vol. 251, No. 11
Features
Kenya, Uganda Reviving Oil Products Pipeline Effort
By Shem Oirere, Africa Correspondent
(P&GJ) — Kenya and Uganda have begun negotiations on the possible revival of the stalled refined oil pipeline extension project from Eldoret in western Kenya to Uganda’s capital Kampala, where a new dedicated terminal receipt facility is be constructed.
The proposed 12-inch, 217-mile (350-km) oil products pipeline was conceived in 1995 under the Joint Co-ordinating Commission and was set up through a memorandum of understanding between Uganda and Kenya. The project also has an option of extension of the network from Kampala to Rwanda’s capital Kigali, an additional 275 miles (434 km).
Initially, both Kenya and Uganda expressed preference for a private sector-led engineering, procurement and construction contract in the development and ownership of the pipeline infrastructure.
The preferred private sector developer was expected to take a 51% controlling stake of equity while Kenya and Uganda had a combined share of 49%. The private developer was to sign a 20-year concession for commercial operation under a build-own, operate-transfer model. The ongoing talks between Kenya and Uganda would confirm whether the initial project structure would be retained or modified.
One of the likely factors that held back the project was the re-designing of the pipeline to make it allow for a future bi-directional flow option with the installation of pumping stations to take products from Uganda’s Hoima refinery in anticipation the crude from Uganda could be transported from Kampala terminal back to Kenya’s port of Mombasa for export.
Uganda has since struck a deal with Tanzania for the construction of the 895-mile (1,441-km) East African Crude Oil Pipeline (EACOP) project to transport crude oil from the Lake Albert oilfields to the port of Tanga port from where the commodity will be sold onwards to world markets.
Kenya’s President William Ruto, and Uganda’s Yoweri Museveni agreed in Nairobi in May 2024 to resuscitate the stalled pipeline project, whose feasibility study was in 1997 funded by the European Investment Bank under $244,955 (€225,000) financing facility.
Later in 2011, the feasibility study for the proposed Kampala-Kigali portion of the pipeline was left to the East African Community, an eight-member intergovernmental organization in East Africa, with financing from the African Development Bank.
Kenya and Uganda later approved both feasibility studies paving way for the award of engineering, procurement and construction (EPC) contract to Tamoil East Africa Ltd, a company incorporated in Uganda but based in Kenya and became part of Tamoil Group of companies, after beating 11 other bidders to the tender.
The contract, was, however, voided in 2012 with a top ministry of energy in Uganda saying “We cancelled the Tamoil contract ... If you do not fulfill the terms of an agreement, what do you expect?”
Another attempt was made in 2014 to pick a new EPC contractor with at least 14 potential bidders lodging their bids to extend the pipeline over a 32-month period with tentative commissioning date slated for 2016. The International Finance Corporation, an arm of the World Bank, pledged $653 million (€600 million) for the Eldoret-Kampala section of the oil transportation infrastructure.
Lack of financing and multiplicity of hydrocarbon projects especially by Kenya and Uganda may have delayed the commencement of the oil pipeline extension.
The proposed new pipeline will be connected to Kenya’s existing 834-mile (1,342-km) of pipeline infrastructure, owned and operated by Kenya Pipeline Company (KPC), a state corporation responsible for transporting, storing and delivering petroleum products to consumers through its pipeline system and oil depot network.
KPC managing director Joe Sang was quoted saying in Nairobi in July 2024 the “extension of the pipeline to Uganda is a strategic move for Kenya as the country seeks to regain its competitive advantage in the petroleum export market, particularly in light of Uganda's new importation strategy.”
Development of the petroleum product pipeline from Eldoret to Kigali through Kampala has not moved forward as a Public-Private Partnership project, according to an earlier report by the Northern Corridor Transit and Transport Coordination Authority, an intergovernmental body, encompassing six countries in Eastern Africa. This corridor is anchored on the port of Mombasa with an international road network, rail networks, inland waterways and pipeline transport.
The NCTTCA said Kenya, Uganda and Rwanda were, through their respective ministries of finance, to source financing for the $1.5 billion pipeline project as an EPC and that contractors have been shortlisted and Request for Proposals “prepared in readiness for when finance is attained for this project.”
Elsewhere, the secretariat of the East African Community, based in Arusha, Tanzania, said the feasibility studies and tender documents for the extension of the existing oil products pipeline from Kenya to Uganda and Rwanda “have been completed and resources for EPC contracting are being mobilized.”
EAC said procurement for consultancy services to carry out feasibility study including route selection and preliminary environmental and social impact assessment for extension of the pipeline from Kigali, in Rwanda to Bujumbura in Burundi, is ongoing as East Africa looks forward to an oil transportation infrastructure that “will facilitate efficient, safe, cost-effective and environmentally friendly distribution of the oil products.”
The proposed extension of the oil products pipeline from Kigali to Bujumbura in Burundi is 136 miles (220-km) in length.
EAC said completion of the feasibility of the proposed pipeline extension project, would pave way for the preparation of the business case and PPP model structure as well as tender documents for recruitment of a consultant firm to carry out detailed engineering design and a detailed Environmental and Social Impact Assessment (ESIA).
“In addition, an oil products pipeline will link a new refinery in Hoima (Uganda) to Kampala making it a hub for refined oil products from the discoveries in the Albertine Graben for distribution in the region through the planned pipeline network,” the statement said.
Uganda’s Minister of Energy and Mineral Development Ruth Nankabirwa said in July the project revival talks between Kenya and Uganda were not “moving in the right direction.”
The minister urged the technical teams from Uganda and Kenya “to embrace teamwork and have this pipeline successfully implemented.”
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