Tullow Oil sees ‘huddle’ of Uganda and Kenya Fail to agree on Common Oil Export Pipeline

Tullow Oil Plc, a major operator in both Uganda and Kenya Oil sector says there are enormous opportunity costs if both nations fail to agree on a joint pipeline.

The company is waiting settlement on the Oil pipeline route and decision on the market options before making operational Final Investment Decision in both East African States.

“For us we think of it as an East African integrated regional infrastructure and the opportunity cost of Uganda and Kenya not cooperating on the pipeline is enormous,” said Tim O’Hanlon, the London-based company’s vice president for African business, said in an interview with bloomberg

Uganda is still counting stakes on whether the oil export pipeline route should go through northern Kenya to port Lamu, or south past Lake Victoria to Tanga on Tanzania’s coast.

Negotiations between Uganda and Kenya recently ended without both sides agreeing to a common position. Uganda President Yoweri Museveni and Kenya Leader Uhuru Kenyatta tasked officials from both countries to carryout feasibility studies on a least cost pipeline route, construction technicalities, approving the Oil reserves to determine the pipeline size, and the viability of ports; Tanga in Tanzania, Mombasa and Lamu in Kenya.

The Pipeline meeting between Uganda and Kenya Kenya are set to resume next week in Kampala. Uganda Oil has learnt that Tanzania has been admitted to the talks that were earlier portrayed by Kenyan Presidency as Exclusive for the two countries.

 Tanzanian President John Magufuli said earlier this month he’d agreed with his Ugandan counterpart, Yoweri Museveni, to route the conduit via his country at a cost of about $4 billion, with Total SA helping fund the project. Nagoya, Japan-based Toyota Tsusho Corp. estimates the Kenyan route may cost about $5 billion.

Tullow along with Total SA and the China National Offshore Oil Corp. are developing Uganda’s oil fields in the western district of Hoima. The Chinese company was awarded its production license in 2013, the only one so far issued by Uganda’s government.

O’Hanlon said Tullow expects its first production in Uganda about three or four years after the company makes its final investment decision in 2017, and that it will be awarded production licenses in the next few weeks.

 “It’s taken time but it’s going fine and it’s of course one of the key issues that we have to have in place before we march into production,” he said.