Uganda ready to pay higher tariff for use of crude oil pipeline through Tanzania

Although Uganda discovered the vast oil reserves a decade ago, the landlocked country has now agreed to pay a higher tariff to use a pipeline planned to run through its neighbouring country Tanzania. This enhances the prospects of a project vital for Uganda's nascent petroleum industry.

In 2016, Uganda picked a route for a pipeline through neighbouring Tanzania to the Indian Ocean port of Tanga to help export its crude. At a length of 1,445 kilometres, the project will cost USD 3.5 billion and has been described as the planet's longest electrically-heated pipeline.

Initially, Uganda said it had agreed with investors and Tanzania that it would pay a tariff of USD 12.2 for each barrel of crude shipped through the pipeline. But the investors, which include France's Total, later demanded a higher tariff, according to the Ugandan officials, stalling negotiations over the project.

The government of Uganda has agreed to augment the tariff to USD 12.77 per barrel after further talks with the investors, Energy Minister Irene Muloni said in a statement on May 14.

Total, China's CNOOC, and Britain's Tullow Oil jointly own the Ugandan fields and are also eyeing varying stakes in the pipeline. About two-thirds of the project's cost will be financed by debt and a Ugandan unit of South Africa's Standard Bank Group and Japan's Sumitomo Mitsui Banking Corp are jointly helping raise the credit.

Uganda discovered crude reserves, estimated at 6 billion barrels, more than ten years ago in fields near the border with the Democratic Republic of Congo. The start of commercial production, which has been repeatedly delayed due to the lack of essential infrastructure such as an export pipeline, is now expected in 2022.

Irene Muloni also opined some preliminary surveys in a new basin in Uganda's Karamoja region, a semi-arid area on the border with Kenya, had shown traces of oil. "The ministry is conducting geological, geochemical and geophysical mapping in Moroto-Kadam basin. Work done so far shows evidence of possible presence of a working petroleum system as demonstrated by the encountered oil seep," she added.

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