President Museveni and his Tanzanian counterpart, pills John Pombe Magufuli have signed the agreement to construct the 1,400 Km Hoima-Tanga pipeline.
This was at a colourful ceremony held in Tanzania’s capital, Dar es Salaam on Sunday afternoon.
Uganda and Tanzania have been negotiating the East African Crude Oil Pipeline Project (EACOP) from Hoima to Tanga Port for the last few years.
The two leaders finalised the Intergovernmental Agreement (IGA) negotiations and consequently resolved all the pending issues on the EACOP project
According to a communique sent to ChimpReports, “Value Added Tax should be deemed paid during the three years of construction phase.”
The waiver was seen as way of removing a bottleneck for investors interested in the construction of the pipeline.
Investors had argued that the VAT was premature as it amounted to taxing investment instead of profit.
It was also agreed by the two leaders that “depreciation should be 5 percent straight line method throughout the lifetime of an asset.”
According to the agreement, “application of branch profit tax should be reviewed by the two states as and when the pipeline company structure is complete and communicated to the two states.”
At the ceremony, President Museveni could not hide his excitement.
“I am very happy to be in this State House where we have signed and concluded all the outstanding issues concerning the oil pipe line agreement. We have agreed that the value added tax to this project is deemed to have been paid,” said Museveni.
The president said the project itself was a culmination of a lot of work and that it showed East Africa can do things if they want to.
“We have been negotiating on the terms of this project. It is a realization of the economic and social development of the country. This project will benefit Uganda and Tanzania. It is one of the strategic ways for the integration of the East African Community and will strengthen our relationship,” he added at the press conference.
The President informed officials and journalists that currently Uganda has 6.5billion barrels of petroleum oil that can be used to economically transform the country and was happy that Tanzania had agreed to help out with the project.
“Once we found petroleum oil, my idea was to refine it and sell it in the country but they told me that since consumption is low in Uganda, we need to get a way to transport it to other markets hence agreeing on the Tanga-Hoima route,” Museveni explained.
The 1,400km (800 miles) pipeline will connect Uganda’s the western oil fields with Tanzania’s port of Tanga and is expected to cost about $4bn (£2.8bn) and create about 15,000 jobs.
Total, which is the main financier of the project, recently said in a statement that the decision to take the Tanzanian route was a “major milestone towards the development and production of Ugandan resources.”
Museveni and Magufuli directed their countries’ Attorney Generals to finalise the clean-up of the draft IGA incorporating these positions within a week from the signing.
Energy Ministers of both countries were told sign the IGA on May 26 in Uganda.
Both parties agreed to set a date for the heads of state to lay a foundation stone at either Hoima or Tanga as soon as possible
The Uganda government insists oil must be flowing by 2021 and has in recent years embarked on massive infrastructural projects to realise this dream.