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Museveni and Magufuli

Museveni, Magufuli agree to fast-track crude oil pipeline project

Uganda discovered oil reserves in 2006 and has had over 6.5 billion barrels of oil.
posted onSeptember 14, 2020

President Museveni and his Tanzanian counterpart John Pombe Magufuli agreed to fast-track the harmonization of issues that are delaying key projects in extracting Uganda's crude oil.

The duo met Sunday in Chato, Tanzania and the East Africa Crude Oil Pipeline (EACOP) project was among the key items of their discussion.

"In principle, we agreed that our governments expedite the harmonization of pending issues in the spirit of the East African Community (EAC), the remaining agreements be fast-tracked including the Tanzanian HGA and we quickly carry out the implementation of EACOP project," President Museveni said in a tweet posted late Sunday.

This was a follow-up meeting after Uganda signed the Host Government Agreement with Total on Friday.

HGA is an agreement between a foreign investor and a host government governing the rights and obligations of the foreign investor and the host government with respect to the development, construction, and operation of a project by the foreign investor. 

The pact has a stabilization clause designed to minimize the financial and political risks posed to foreign investors as a result of sudden changes in national law. An HGA is often required by foreign investors in countries where foreign investors' rights are not otherwise protected by a bilateral investment treaty, experts say.

While Uganda has signed the HGA, Tanzania is yet to sign one. The oil pipeline will start in Buseruka sub-county, Hoima District, and run for 1,445km to the Tanzania port city of Tanga. When complete, it will be the world's longest heated oil pipeline.

The delays in signing these deals have pushed the announcement of the Final Investment Decision (FID), a key step in seeing various partners inject money in projects to commercialize Uganda’s oil resource.

The oil refinery Project Framework Agreement between the government and the Albertine Graben Refinery Consortium (AGRC) was signed in April of 2018.

The AGRC comprises YAATRA Africa (Mauritius), Lionworks Group Limited (Mauritius), Nuovo Pignone International SRL (a General Electric Company located in Italy) and SAIPEM SPA (Italy).
In the consortium, Uganda is represented by UNOC, a limited liability petroleum company owned by the government. [The government will hold a 40% stake in the project and the other 60% belongs to the Consortium.]

The signing of the PFA meant pre-FID activities like Front End Engineering and Design (FEED), Project Capital and Investment Costs Estimation (PCE), Environmental and Social Impact Assessments (ESIA) can commence.

Under this agreement, AGRC is responsible for funding the pre-FID activities listed above and will also proceed to construct and operate the refinery. The $3.5-billion refinery in Hoima district, which will have a refining capacity of 60,000 barrels per day, is to be built by the AGRC led by American firm General Electric.

The project, upon completion, will enable Tanzania to earn about $3.2 billion and create between 10,000 to 15,000 jobs over the next 25 years

Uganda discovered oil reserves in 2006 and has had over 6.5 billion barrels of oil.

FID is expected to bring an investment of close to $20 billion, according to the Minister of Energy and Mineral Development Mary Goretti Kitutu. 

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