Uganda seeks $130m for pipeline deal

A pipeline. Ugandan parliament’s Committee on National Economy will have the last say on whether the government gets the money in time for the final investment decision, to tie up its equity in the $3.5 billion pipeline project. PHOTO | FILE | NMG

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By JULIUS BARIGABA

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To fund its 15 percent share of the East African Crude Oil Pipeline, Uganda is opting to

borrow Ush481 billion ($130 million) from the domestic market to financially back its shareholding with equity.

The 15 percent is owned through the Uganda National Oil Company and the money is a precondition for the government to solidify its ownership in the project.

The loan will also pay for “historical costs,” which international oil companies have been footing since 2017 on behalf of the government, such as the project’s design and environmental impact studies.

After failing twice, parliament’s Committee on National Economy will now have the last say on whether the government gets the money in time for the final investment decision, (FID) to tie up its equity in the $3.5 billion pipeline project.

“We are still scrutinising this loan request and the different agreements,” before deciding whether to grant authorisation to borrow domestically, Committee chair Syda Bbumba told The EastAfrican.

Ms Bbumba said parliament’s concerns are that the government did not make the request during the budget planning cycle, and is now ambushing the committee.

The East African Crude Oil Pipeline (Eacop) agreements that are being scrutinised include the Inter-Governmental Agreement, signed in 2017, the Host Government Agreement, the shareholder agreement, tariff agreement and transportation agreement all signed in 2020.

On March 24, Junior Minister for Finance David Bahati held discussions with parliament’s Committee on National Economy, and the Budget committee to explain the urgency of the loan, the shareholding structure of Eacop and its impact on Uganda’s economy. This was a follow-up to two previous unfruitful meetings that Mr Bahati held with parliament only days earlier, when the lawmakers rejected borrowing of $130 million on the grounds that there was no evidence that the loan request was conditioned to FID.

“Negotiations for the Final Investment Decision for Eacop are in advanced stages. The Eacop Bill has been drafted and is under discussion between government and the oil companies before it’s eventually presented to parliament. Conclusion of these negotiations and the Bill will pave the way for FID and thus enabling construction to start,” Mr Bahati explained to parliament.

He had appeared before the committee with Energy Minister Mary Goretti Kitutu and officials from National Oil on March 18, to get parliament’s approval which the government was to table at the Eacop signing ceremony that had been scheduled to take place on March 22 in Kampala but was deferred to an undisclosed date in April.

Unoc Chief of Legal and Corporate Affairs Peter Muliisa says the urgency for borrowing is that these monies are to be reimbursed to Total when the parties sign the shareholder agreement and the FID “in the next few weeks.”

The Eacop is a 1,445km long heated pipeline, a key component of the commercialisation of Uganda’s oil, which will transport crude oil from the Lake Albert oil production sites at Tilenga and Kingfisher projects in western Uganda to Tanga in Tanzania.