Total E & P: Oil Pipeline Deal to Boost Foreign Direct Investment in Uganda

An oil pipeline is laid next to the Vopak-Dialog oil storage facility (R) and a Refinery and Petrochemical Integrated Development (RAPID) project construction site in Pangerang in Malaysia's southern state of Johor October 6, 2015.  REUTERS/Edgar Su/File Photo
Photo credit: Reuters

The construction of the East African Crude Oil Pipeline (EACOP) which was commissioned on Saturday by President Museveni and his Tanzania counterpart Joseph Pombe Magufuli is expected to boost the Foreign Direct Investment of both countries by a significant 60 percent.

This is according to a statement by the Joint Venture partners; CNOOC Uganda Limited, Total E&P Uganda and Tullow Uganda which are undertaking the project estimated to cost US$ 3.55bn.

The venture partners said the project would open up the entire East African region to further opportunities for trade and socio – economic development.

Magufuli, while launching the oil pipeline construction, said between 10,000 to 15,000 direct jobs will be constructed while temporary ones will peak to 30,000, adding that some businesses like hotels are already benefiting from the guests coming to establish enterprises.

Following yesterday’s milestone, JV partners said they would “embark on a journey of detailed planning and execution complimenting the already ongoing studies such as Environment and Social Impact Assessments and Front End Engineering Design for the EACOP project.”

The Upstream JV partners also appreciated the efforts by the two governments (Uganda and Tanzania) in enabling the timely achievement of the development and commercialization of Uganda’s oil resources.

The laying of the foundation stone comes after the signing of the Inter-Governmental Agreement by both countries for the project which is expected to start pumping Ugandan oil to international markets by 2020.

The 1,445 km pipeline will start in Hoima, where crude reserves were discovered in 2006, and terminate at Tanzania’s Indian Ocean seaport of Tanga.

Reports indicate the heated crude oil pipe line, the longest of its kind in the world, will on completion carry 216,000 barrels of crude oil for export daily.

Museveni, on his part Saturday, said because of the numerous concessions from the Tanzanian government, the cost of delivering a barrel of oil from Hoima to Tanga will be $12.2 per barrel, making Uganda’s crude oil profitable even at today’s rate of $50 per barrel.

He further lauded Magufuli for the concessions on the pipe line, saying: “There will be no pay transit tax, no Value Added Tax, no corporate income tax, gave us 20 years depreciation tax holiday, granted us a free corridor where the pipe line passes and promised to buy shares in the pipe line.”

Museveni also implored all East African member states to look at the East African crude oil pipe line as an East African community asset, noting that with many discoveries of oil and gas deposits in many other countries in the region, the facility will be a vehicle for oil to the sea from all the East African countries.


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