By ALLAN OLINGO
KAMPALA - Uganda expects to conclude the financial deal for its joint pipeline with Tanzania by mid next year, opening the way for its construction after delays that have seen Kampala shift its production timelines from December 2020 to mid-2021.
Last Wednesday, Stanbic Bank Uganda, lead arranger for the $2.5 billion funding for the 1,455km East Africa Crude Oil Pipeline (Eacop) project, said that it expects the deal to conclude in June 2019.
Kampala is banking on the final investment decision (FID) between the government and the oil partners to determine when funds for the project will be made available, the terms of the financing and when the project execution will commence, with a projected timeline of between 30 and 36 months.
Uganda and Tanzania signed an agreement in May 2017 to jointly develop the $3.5 billion pipeline that has been described as the longest electrically heated crude oil pipeline in the world. The balance of $1 billion is expected to come from shareholders in equity.
Stanbic Uganda secured the role of joint arranger and adviser with Japan’s Sumitomo Mitsui Banking Corp. The two banks had previously planned raise $3 billion by June this year from export credit agencies.
Ugandan Patrick Mweheire, Stanbic’s chief executive, said it had engaged other lenders in Europe, Japan and China, and the response has been positive.
“People like the project because the economics of the pipeline make a lot of sense. I think we are looking at some time in June next year for financial close,” Mr Mweheire said.
Energy Minister Irene Muloni, speaking at the Africa Oil Week in Cape Town last week, said the protracted discussions on the FID had pushed the government to provisionally shift early commercial oil production to 2021.
Uganda received the front-end engineering designs (FEED) last December and has delayed in making the approvals as per the previously promised timelines. The project has already seen the Shareholders’ Agreements and Financing Agreements talks opened.
“As it is, we are waiting for the companies to make their final investment decisions. The front-end engineering designs have been completed.
“Currently we are in process of approving our designs,” Ms Muloni said. The project’s environmental and social impact Assessment report is also said to be in its final stages and is expected to be handed over to the government this December for review.
“The completion, review and approval of the report will now offer us the go ahead to start of the implementation of the project. Already we have completed the land surveys on the pipeline corridor and facility sites. We will submit the report to the National Environment Management Council by December for approval,” said Total East Africa's social and land manager Jean Lennock, adding that they expect the issuance of ESIA certificates to follow after the report has been approved.
The EastAfrican understands that this approval is expected to be received before the end of the first quarter of next year, even as Uganda, and its oil venture partners French Total E&P and China's CNOOC, depending are also expected to reach final investment decision (FID) before June, determinant on the financial deal progress by the project’s lead financiers.
Tanzania and Uganda are hoping to conclude the host government negotiations by the first quarter of 2019 as per their inter-governmental agreement.
“We have made good grounds since we started the negotiations in August last year. We are in the last stretch of negotiations touching on the volumes to be moved and the tariffs to be charged. We hope to complete this before the end of March,” a source told The EastAfrican.
The project’s social and resettlement services report has also been submitted to the Tanzania government by Digby Wells Environmental.
The Ugandan pipeline project has suffered delays as a result of prolonged negotiations that has seen actualisation timelines moved.
In August, Robert Kasande, Permanent secretary in Uganda’s Energy Ministry said that the host agreements with London listed Tullow Oil, France Total and Chinese CNOOC, who are jointly developing Uganda’s oil, could be signed by end of November, but this is yet to happen.
Tullow, in the same month in its half-year update, indicated that the Uganda deal was expected before the end of the year given that the upstream FEED and ESIA have been completed, which would have resulted in the award of the engineering, procurement and construction contracts.
“The contract awards are under evaluation and overall project sanction expected around the end of 2018. The joint venture partners continue to work towards reaching final investment decision for the development project around the end of 2018 with operational activity continuing as planned.
“Discussions on the key pipeline project agreements continue between the partners and the Ugandan and Tanzanian governments. The pipeline FEED and EPC tender process for the pipeline have been completed with the award to be made in the second half of this year,” the firm then said.
Uganda and Tanzania, together with the oil firms have in the past 18 months been working on the project’s financing blueprint, which will see the two nations raise 70 per cent of the project’s total costs from international lenders.
The remaining 30 per cent capital will be raised through equity by Total, Tullow, CNOOC and JV partners. The Tanzania Petroleum Development Corporation and the Uganda National Oil Company.