Argus Media Limited

11/23/2021 | News release | Distributed by Public on 11/23/2021 09:09

Uganda eyes Lake Albert pipeline law by year-end

Uganda expects to have a law in place by the end of this year governing construction of a crude export pipeline from its 230,000 b/d Lake Albert development, paving the way for first oil from the project by the first quarter of 2025.

The $20bn Lake Albert project, which is being jointly developed by TotalEnergies and Chinese state-owned CNOOC, has been mired in bureaucracy for several years following protracted negotiations over upstream contract terms, tax disputes and disagreements over the pipeline's route.

The development involves linking the 190,000 b/d TotalEnergies-operated Tilenga and 40,000 b/d CNOOC-operated Kingfisher oil fields by a 216,000 b/d heated pipeline - the East Africa Crude Oil Pipeline (EACOP) - to neighboring Tanzania's Indian Ocean port of Tanga.

With financial investment decisions (FID) taken by both project partners, and Tanzania's parliament having approved the bills on its side, Uganda's energy minister Ruth Nankawirba said the stage is set for the project.

"We are expecting the approvals. And I still hope that parliament will be able to complete this discussion on the bill by the end of November," Nankawirba told Argus. The country's president, Yoweri Museveni, would then sign the bill into law.

The bulk of the production will go to Tanga, with the remainder feeding a 60,000 b/d capacity refinery to be built in Uganda.

"We planned for upstream, midstream and downstream simultaneously and concurrently," Nankawirba said. "So, the three things [upstream work, pipeline construction and refinery construction] must happen at the same time."

TotalEnergies' chief executive Patrick Pouyanne said in September that the company had given conditional awards to all the contractors to they can execute without delay once the paperwork has been complete, and that it was close to finalising land acquisition for both the upstream facilities and pipeline.

Once the EACOP bill is passed, work can formally begin on the 1,445km pipeline. The stakeholders have put the project's cost at around $4bn, although this rises to $5bn when including the financing costs.

The newly formed EACOP company, a joint venture between the project partners and the governments of Uganda and Tanzania, will oversee all pipeline-related activities. TotalEnergies holds 62pc in the company, CNOOC 8pc, and the state-owned duo of Uganda National Oil (UNOC) and Tanzania Petroleum Development (TPDC) 15pc each.

The pipeline will be manufactured abroad and delivered to Uganda and Tanzania where it will first be insulated at a pipeline coating plant before it is laid. EACOP general manager Martin Tiffen said around 100km will be constructed each month for close to 16 months, suggesting a start of pipeline laying activities in early 2023.

Lingering risks

Two suicide bomb attacks in the Ugandan capital Kampala last week, for which Islamic State (IS) claimed responsibility, served as a stark reminder of the risks that linger for the country's oil ambitions, particularly given instability over the border in the east of Democratic Republic of Congo (DRC).

IS has links with the Allied Democratic Front (ADF) insurgent group which is active in eastern DRC, near to the Lake Albert Developments. The ADF killed thousands of civilians in Mozambique, paralyzing the LNG plant there, leading to a year of closure.

But Nankawirba said she does not expect the regional instability to undermine the Lake Albert project, especially given efforts by the Ugandan government to strengthen bilateral relations with its DRC counterparts.

"We are coming up with a Joint Permanent Commission, and working on developments bilaterally," Nankawirba said. "We are trying to open up. The new leadership in the DRC is very positive, and we hope that through these bilateral engagements we will be able to protect our resources, especially at the border."

By Nader Itayim