A cargo train departs the port of Mombasa in this completed phase I
section of the standard gauge railway project. FILE PHOTO | NMG
In 2013, the presidents of Rwanda, Kenya, Uganda and South-Sudan
came together to fast-track the implementation of infrastructure
projects on the Northern Corridor, at a time when the pace had slackened
or stalled for some, due to a lack of commitment by Tanzania.
Under
the Northern Corridor Integration Projects, the four leaders forged a
unity of purpose in what famously came to be known as the Coalition of
the Willing (CoW).
Among the targeted joint projects were oil pipelines, standard gauge railways, a refinery, a port and power projects.
The
highly anticipated East African crude oil pipeline from Hoima in Uganda
through Lokichar in Kenya to the proposed Lamu port on the Indian Ocean
coast is a non-starter.
To date, its construction is still in limbo, almost three years after it was approved by the regional heads of state.
The
pipeline, which was to be completed this year, has been delayed by the
wavering of investor interest, especially after Uganda abandoned it for
the proposed 1,445km long Hoima-Tanga one led by Tanzania.
But even the Hoima-Tanga pipeline construction that was expected
to start late last year hit a snag, after investors who had expressed
interest demanded a higher transit tariff beyond the $12.20 per barrel,
which had earlier been agreed on.
This has raised serious doubts over Uganda's target date for the commencement of production.
In 2016, Uganda’s Energy Minister Irene Muloni said construction could take about three years.
The
pipeline, estimated to cost $3.55 billion, will transport Uganda’s
crude from Kabaale in the western Hoima district, to Chongoleani
peninsula near the Tanga Port in Tanzania for export.
Uganda
and Tanzania are expected to finance 70 per cent of the pipeline's
total cost through international lenders while the remaining 30 per cent
capital will be raised through equity by Total, Tullow, China National
Offshore Oil Corporation (CNOOC) and joint venture partners.
Lapsset
It
is argued that Uganda’s decision to abandon the Kenyan route of the
regional crude pipeline also watered down the Lamu Port South Sudan
Ethiopia Transport (Lapsset) corridor, an acclaimed joint project for
the region that would have encompassed an oil refinery in Hoima,
transport corridor to South Sudan oil fields and to Ethiopia, Lokichar
oil pipeline and the Lamu port.
The future of the Northern Corridor infrastructure projects now hangs in the balance.
South Sudan’s Minister for Petroleum Ezekiel Lol Gatkuoth told The EastAfrican last
November that the move by Uganda to ditch the Kenyan route not only put
the future of the Northern Corridor projects in limbo but also the
ambitious Lapsset.
“The Lapsset corridor was supposed
to benefit South Sudan and we are still committed to it. But we cannot
do much about other developments in the region. Uganda's rejection of
the Kenya route in favour of the Tanzania one is a serious issue,” said
Mr Gatkuoth.
Joint crude oil refinery
The
region had also planned a joint crude oil refinery in Hoima, western
Uganda, but its implementation has also been marred by lack of
commitment by investors.
The project has fallen behind schedule by close to five years after member countries’ lacklustre pace in acquiring ownership.
Uganda,
Kenya, Tanzania, Rwanda and Burundi had been allocated a combined 40
per cent shareholding in the refinery, translating to 8 per cent stake
for each, with 60 per cent of the shares reserved for private investors.
So
far, only Tanzania has taken up its full 8 per cent shareholding in the
refinery while Kenya has only taken up 2.5 per cent stake.
Rwanda
and Burundi are yet to commit to the project. As a result, Uganda is
expected to take up an additional 11.5 per cent bringing its total
shareholding in the Hoima-based refinery to 19.5 per cent after the
French oil giant Total SA took up 10 per cent stake.
The deadline for acquisition of shares had been set for 2014 before being extended to June 2016.
In
2016, Uganda’s Energy Minister Irene Muloni pushed the completion date
of the refinery to 2020 from 2018 following delays by EAC member states
to take up ownership and get another lead investor after talks with the
Russian consortium Rostec Global Resources, which had won the tender to
finance, build and operate the refinery collapsed in the last minute.
Last
year, Ms Muloni said the refinery would now be operational by 2023
after a consortium led by the US multinational General Electric Company
contracted to build the 60,000 barrel-a-day plant delayed in carrying
out its front-end engineering design, or FEED.
The
design initially due for completion in 2017 started last year 2018. Ms
Muloni said the delay would impact the completion of the refinery.
Kenya’s crude
As
the region struggles to get its oil infrastructure in place, Kenya’s
ambitious plan to evacuate crude by road has been hit by delays, blamed
on lack of proper planning, logistical nightmare and lack of widespread
consultations.
This means the country's dream of exporting oil has yet again been deferred to June this year.
Analysts
had long warned that Kenya's hurried plans to have its oil hit the
international markets under the Early Oil Pilot Scheme (EOPS) was doomed
to fail but the government, Tullow Oil and its joint venture partners
insisted on its implementation.
A 2016 scheme to
evacuate crude by road from Lokichar in Turkana to Mombasa port, a
distance of more than 900 kilometres has now proved to be a daunting
task.
The failure to adhere to set timelines,
considering that Kenya had set a target of February 2019 to ship out the
first consignment of 450,000 barrels, has seen the EOPS join the other
regional projects that are now nothing more than pipe dreams.
Tullow
has admitted that initial targets to truck 2,000 barrels per day have
failed, with the three firms contracted to transport the crude managing
an average of 1,800 barrels a week, which translates to about 250
barrels per day.
Since the trucking of the crude
commenced in June last year, only 60,000 barrels have been transported
for storage in Mombasa and the company is hoping it can achieve the
targeting of transporting 2,000 barrels by April.
Just
like many other projects whose implementations are facing challenges,
the EOPS was conceived, designed and implemented under circumstances
that have largely remained opaque.
The government, Tullow and its joint venture partners Africa Oil Corp and Maersk Oil have failed to adhere to disclosure laws.
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