A US$ 4bn framework agreement has officially been signed by Uganda and Tanzania for the construction of a crude export pipeline.
The agreement which covered terms on tax incentives for the crude export pipeline project, implementation timelines, the size of the pipeline and local content levels, keeping it on track to complete in 2020 indicated that the pipeline is expected to start pumping Ugandan oil to international markets in the next three years.
Adewale Fayemi, the Manager for Uganda at Total, said the project will become the longest electrically heated crude oil pipeline in the world.
“It’s a record which will increase the flow of foreign direct investment and open a new phase of economic development in the region when completed,” Fayemi said.
The pipeline which is 1,445 km-long and 24-inch in diameter will be heated so it can keep highly viscous crude oil liquid enough to flow.
The agreement predetermined that Uganda would pay an estimated transit tariff of US$12.20 per barrel for pumping its oil through the pipeline. In January, both countries awarded the Front-End Engineering Design contract for the pipeline to Gulf Interstate Engineering based in Houston.
Uganda projects overall crude reserves at 6.5-billion barrels, while recoverable reserves are seen at between 1.4-billion and 1.7-billion barrels.
Tanzania had offered a “fiscal incentives package” that led Uganda to choose it over Kenya as the favoured host for the pipeline. Kenya had bid to host the same pipeline, which would have allowed it to earn transit fees and also transport its own crude in the Lokichar basin in the northwest.
Construction of the pipeline would facilitate and boost trade in the region and create over 10,000 jobs.