President Yoweri Museveni has said the signing of the Host Government Agreement (HGA) for the East Africa Crude Oil Pipeline (EACOP) project between the government of Uganda and French gas company Total brings the East African nation closer to earning from its crude oil.
I congratulate Total upon concluding this agreement which moves us closer to production of crude oil in Uganda,” the president said, reassuring Ugandans that every detail has been checked. “It has taken long but I want to assure Ugandans that this was deliberate. We have gone through every item.”
The pact was signed on Friday afternoon at State House in Entebbe and was presided over by President Museveni, and witnessed by Mr. Patrick Pouyanne, the Chairman and Chief Executive Officer of Total.
The Minister of Energy and Mineral Development, Mary-Goretti Kitutu, signed on behalf of Uganda while Nicolas Terraz, the Total Exploration and Production President for Africa, signed on behalf of his employer.
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.
The president noted that monies from oil production, while not as much compared to other resources the country owns, will add great value to national development.
“Uganda is a rich country, with oil as a small fraction of this wealth. The big part is agriculture, industry, services and human resource. Oil, however, can be a good spark for transformation,” he said.
“It will bring money which we shall use to develop infrastructure, science and technology. This money will not be used for consumption. We shall use it to enhance our durable capacity.”
In a separate statement, Total noted that it had reached an agreement with Uganda on the conditions of entry of the Uganda National Oil Company (UNOC) in the project as well as on the Host Government Agreement (HGA) which will govern the export pipeline project in Uganda.
"We have today reached major milestones which pave the way to the Final Investment Decision in the coming months,” said Pierre Jessua, Managing Director of Total E&P Uganda.
The company is also planning to sign an HGA with Tanzania. “We now look forward to concluding a similar HGA with the Government of Tanzania and to completing the tendering process for all major engineering, procurement and construction contracts,” reads the statement.
President Museveni promised to follow-up with his Tanzanian counterpart. “I will get in touch with His Excellency John Pombe Magufuli to follow up on Tanzania's host agreement,” he said.
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.
Meanwhile, Total Uganda says the conditions are set for the ramp-up of project activities and in particular.
“We will resume the land acquisition activities in Uganda while respecting the highest human rights standards,” reads an official statement. “Total E&P Uganda reiterates its willingness to pursue a constructive dialog with the communities and NGOs regarding all project activities.”
FID is expected to bring an investment of close to $20 billion, according to the Minister of Energy and Mineral Development Mary Goretti Kitutu.