Geopolitical Intrigues Decimated a Planned Uganda-Kenya Pipeline for EACOP: Report

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Geopolitical Intrigues Decimated a Planned Uganda-Kenya Pipeline for EACOP: Report

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Pipeline in the sunset (©Shutterstock/Dabarti CGI)
Pipeline in the sunset (©Shutterstock/Dabarti CGI)

The famously known East African Crude Oil Pipeline (EACOP) is a clone of the never-implemented Uganda-Kenya Crude Oil Pipeline (UKCOP), shaped by political intrigues within the EAC bloc,  a report published on ScienceDirect by Brandon Cannon and Stephen Mogaka reveals.

With the initial idea being to construct a joint crude oil pipeline linking Kenya's landlocked neighbour, Uganda, to the port of Lamu and do away with massive traffic jams and damage to roads caused by the increasing fleet of oil tankers, the UKCOP was proposed in 2014 with the prospects of benefiting the two East African neighbours (Kenya and Uganda) through cost sharing of the project's price tag and the revenues generated by the crude exports.

As detailed in the report, the UKCOP would link Uganda's oilfields in Hoima in the west with those in Kenya's Lokichar in the northwest and stretch southeast to the Lamu port located on the Kenyan coast. The pipeline would also tap South Sudan's Oil, which according to the report, is of higher quality due to its low Sulphur, and also cheaper to extract. This would help South Sudan to reduce its decades of reliance on the Republic of Sudan(Sudan) for its oil exports.

The UKCOP's initial prospects would enable Juba to ship an estimated 130,000 barrels of oil per day before including the Ugandan and Kenyan crude export volumes. The project would also leverage the integrated Lamu Port-South Sudan-Ethiopia Transport (Lapsset) Corridor project, helping Kenya to offset some of the perceived cost of developing her northern regions, which are largely marginalized.

However, the project never progressed beyond the conceptual paperwork stage as Uganda ditched the idea in favour of a more competitive counteroffer by Tanzania, which led to the now-famous 1440-kilometre EACOP, planned to link Uganda to Tanzania's Tanga port.

The Demise of the Uganda-Kenya Pipeline—Tanzania's Lobbyists and Oil Majors Played a Pivotal Role

According to the reports, many factors, including the geopolitical rivalry within the EAC bloc, lobbying by Tanzania, and inclined interest by oil majors, played a critical role in shaping the EACOP to the demise of the UKCOP.

Following successful planning and considerations, Uganda's president, Yoweri Museveni and Kenya's Uhuru Kenyatta agreed in 2015 to undertake the UKCOP project in 2016. However, by then-President John Magufuli exploited Uganda's historical concerns about Kenya and sent a delegation of experts who offered a competitive offer to Uganda, shifting the tides in their favour.

And when Kenya was expecting to commence the joint project in 2016, Uganda's president announced an alternative feasibility study that would pave the way for the construction of the 1440-km crude oil pipeline that would instead link Uganda to Tanzania's port of Tanga. This left Kenya with no option but to build a pipeline linking Lokichar to the port of Lamu.

According to the report, multinationals played a pivotal role in killing the Kenya-Uganda crude oil pipeline and taking Uganda on a different route. Although UK-headquartered Tullow Oil, which has oil exploration fields in Kenya, and China National Offshore Oil Corporation (CNOOC) had significant interests in the project, Total Energies had its way due to its enormous financial capability, getting the largest stake of  62%, leaving UNOC and TPDC with 15% each and CNOOC 8%.

"Total offered to build the Tanga pipeline and promised to source funding," the report says, adding that "The pledge of secured funding was particularly appealing to Uganda because fiscal challenges had previously delayed other infrastructure projects in the country such as dams and transport corridors."

The new pipeline route would also favour TotalEnergies 2017 decision to explore oil around Lakes Tanganyika, Eyasi, Wembere and Rukwa areas, which lie conveniently along the planned path for the EACOP.

"The EACOP, feeding south and east, will thus link more easily to Total's other oil interests in the Rift Valley system," the report explained, adding that TotalEnergies lobbied aggressively for the pipeline and went ahead to source for capital for the venture until the final deal was signed in April of 2021.

Uganda's President Opposed the Pipeline in Favor of a Refinery

However, it later turned out that President Museveni opposed the EACOP plan in favor of setting up oil refinery in Uganda for economic reasons before bowing to pressure and giving in to the new project.

In several forums before signing the massive investment deal with TotalEnergies and CNOOC in February 2022, Museveni openly revealed he wanted a refinery since it would offer the best opportunity to commercialize the crude from the oil-rich Lake Albert region.

"The oil companies insisted, no, we need a pipeline," Museveni told Uganda TV channel NBS. "So we had to agree to a pipeline mainly because it would also benefit our brothers in Tanzania. That's why I actually agreed because I said if [Tanzania] they can get something…."

The president's comments underscored the pivotal role of Tanzania's lobbyists and the lucrative deals offered by the oil multinationals in shifting the country's focus from the 1500-kilometre UKCOP to EACOP. And on the other hand, it was also political goodwill to return favor to Tanzania in the spirit of brotherhood for helping Uganda oust the famous dictator, Iddi Amin Dada, which paved the way for Museveni's decades in power.

Museveni later clarified that losing $12.7 per barrel in tariff to Tanzania was part of his concerns for the new route, but he agreed to go ahead with the project for their neighbour Tanzania to also benefit from Uganda's oil profits.

The tariffs were also cheaper as Tanzania finally settled for $12.2 per barrel compared to Kenya's offer of $12.60 and $15.90 per barrel. In terms of the project's overall cost, EACOP would cost $4 billion, making it $1 billion cheaper than the $5 billion price tag for UKCOP.

Compounded with factors such as ease of land acquisition in Tanzania than in Kenya—which was greatly exploited by the Dodoma Lobbyists, Uganda's need to reduce dependence on Kenyan ports for imports and exports, and Kampala's quest to cement their ties with Dodoma, which had remained Isolated from EAC for the better part of Jakaya Kikwete's regime (2005-2015), the East African Crude oil pipeline (EACOP) won Uganda's approval.

"A spurned Kenya announced that it would build its own stand-alone pipeline to transport its oil reserves to the coast and, in (August) 2019, became the first country in the region to export its oil," said the researchers quoted by the East African.

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