The 1,443 km East African Crude Oil Pipeline (EACOP) will be the longest oil pipeline ever built in East Africa, connecting the town of Hoima, in the western region of Uganda, with the port of Tanga, on the Tanzanian coast of the Indian Ocean. The project, conceived in 2016 and rolled out in August 2017, is due to be completed over the next two years with a total cost budgeted at USD3.5-4bn. The project’s shareholding companies are the Uganda National Oil Company (UNOC), the Tanzania Petroleum Development Corporation (TPDC), the China National Offshore Oil Corporation (CNOOC), France’s Total and the United Kingdom’s Tullow Oil. The contract to design the oil pipeline that will transport crude oil produced in Uganda's Lake Albert basin was awarded to the American company Gulf Interstate Engineering. The deadline for submission of tender documents for the consultancy services relating to the feasibility studies for the project was August 24, 2018. Once fully operational, the pipeline is expected to have an export flow rate of 216,000 barrels a day.
The design phase has met with several challenges, resulting in changes in the initially planned route. The project originally involved the construction of an oil pipeline linking Hoima to the port of Lamu in Kenya. However, Ugandan authorities subsequently opted for an alternative route due to the presence of Al-Shabaab jihadi militias in Kenya, mainly operating in Somalia but who in recent years have intensified their incursions inside Kenyan territory. Besides security issues, a further cause for concern was the cost of the project and, based on Ugandan government assessments, crude oil transport via Tanzania is cheaper than via Kenya.
A key infrastructure for East Africa
The new infrastructure project meets Uganda’s economic and energy needs. The project will enable Uganda to have a direct link to the Indian Ocean and to export its considerable crude oil reserves in Lake Albert at the lowest possible cost. The official announcement of the pipeline route was made during the summit of Heads of State and government leaders of the East African Community (EAC) held in Arusha in March 2016, causing a reaction among Kenyan officials, who expected the pipeline to go through Kenyan territory and thereby bring economic benefits to the country from its substantial oil reserves. Accordingly, the Nairobi government decided it would build its own oil pipeline in the country’s north-eastern region, connecting the Lokichar region to Lamu County. The EACOP oil pipeline, on which construction has yet to begin, will be East Africa’s first trans-border pipeline and is designed to meet the economic and energy needs of both countries. Uganda aims to export at the lowest possible price its crude reserves, estimated at 6.5 billion barrels but as yet unexploited since Uganda’s is a landlocked country. Tanzania, for its part, has vast offshore natural gas reserves but needs Ugandan crude oil. The oil pipeline will provide the opportunity to tap into the operating and potential natural gas deposits of Tanzania, which shares with Northern Mozambique one of the largest natural gas fields discovered on the planet in recent years.
The strategic function of the new refinery in Hoima
Uganda aims to start production by 2020, although the date is expected to be delayed until 2021-2022 since the executive design phase of the Hoima refinery is only just beginning, and the final investment decision (FID), initially set for 2017, is now expected to be reached by the end of 2018, or in early 2019 at the latest. The contract for the construction of the 60,000-barrel-a-day facility was awarded to a group led by the American company General Electric (which will own a 60 percent stake). The project partners include the Italian company Saipem, which was awarded a new contract for Front End Engineering Design (Feed) by the Albertine Graben Refinery Consortium on August 3, 2018. The refinery will be a hub for refined products intended for the East African market, thereby contributing to the region’s economic growth. The facility, due to start production in 2020, aims to provide greater independence to Uganda’s domestic market and the reduction of its imports of oil and refined products from other countries, with a view to gradually securing infrastructure integration between East African countries.