Uganda should opt for Tanzania in the Oil Export Pipeline Deal

By William G. Naggaga…

It was reported recently that the French oil giant, Total, was ready to finance the building of a crude oil pipeline from Uganda’s Albertine Graben to the Tanzanian port of Tanga. The pipeline would cost an estimated $4 billion (Shs13 trillion) and Total had already secured the required funding.

The revelation was made by Total to President John Magufuli of Tanzania but since Uganda and Tanzania in October 2015 signed a memorandum of understanding on the proposed pipeline project, there is no doubt that President Museveni had already been informed of the development.

It appears Uganda was ‘re-thinking’ the MoU it had signed with Kenya in August 2015 for development of the pipeline to the Kenyan port of Lamu given concerns it had raised with Kenya regarding security at Lamu port.

Though the southern route to Tanga is slightly longer (1,410 kms) than the northern route to Lamu (1,300kms), it will cost less than for the northern route (estimated at $4.5 billion) and unlike the latter, it had assured upfront financing. With Total opting for the southern route, it would be difficult to get it to join the consortium with the other oil companies operating in Uganda to finance the northern route.

Total already has operations in Tanzania and hence its willingness to assume full responsibility for the building of the pipeline for the southern route. For Uganda which has for long looked for an alternative route to the sea, the Total decision could not have come at a better time. The pipeline could be the first step in a full fledged alternative route to the Indian Ocean.

As far back as the 1960s, Uganda and Tanzania explored the possibility of developing the port of Tanga for the primary purpose of serving Uganda, the only landlocked of the original three EAC countries. President Julius Nyerere and his close ally Milton Obote had serious discussions on this project.

The problem then (and probably even now) was Kenya, which saw it as an attempt to take business away from Mombasa port, which enjoyed absolute monopoly of handling exports and imports not only for Uganda but also for Rwanda, Burundi and the eastern part of DRC.

The project suffered a blow when Obote was overthrown by Idi Amin in 1971. The bad blood between Amin and Nyerere led to the collapse of the EAC and also put an end to any serious bilateral co-operation between the two countries.

After the fall of Amin in 1979, succeeding governments in Uganda, especially the NRM government, often talked about an alternative route to the sea, given the congestion and delays at Mombasa, which have resulted in exporters and importers incurring heavy losses.

There were many incidences of goods awaiting clearance at the port for six months or more, and sometimes illegally auctioned off. Neighbouring countries like Rwanda, Burundi and DRC suffered the same fate. Kenya has now tried to improve service delivery at Mombasa Port but the high cost of cargo handling and delays are still there and are bound to escalate with increased volumes of imports and exports, resulting from accelerated economic growth. An alternative route to the sea will hence not necessarily hurt Kenya. There will be sufficient traffic for both routes.

Following the Total offer to develop the southern pipeline, Kenya is trying to repackage the northern route and to make it more appealing to Uganda. A meeting was recently between President Uhuru Kenyatta and President Museveni to resuscitate negotiations for the northern route, which had stalled.

What came out of that meeting was an agreement to meet again in two weeks after officials had fully examined the issues pertaining to the two alternative routes.

Mr Naggaga is an economist, administrator and retired ambassador.

This opinion piece was first Published by the Daily Monitor

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