The proposed law tabled by the Minister of State for Energy and Mineral Development, Opolot Okasai, seeks to fully implement the obligations of Uganda under the Intergovernmental Agreement signed between Uganda and Tanzania and the Host Government Agreement signed between Uganda and the East African Crude Oil Pipeline Company Lt.
East African Crude Oil pipeline project commissioned by Museveni and Pombe Magufuli
The government has tabled before Parliament a draft law through which Ugandans will be given priority for use of labour and other resources, during the construction of the East
African Crude Oil Pipeline (EACOP).
The proposed law tabled by the Minister of State for Energy
and Mineral Development, Opolot Okasai, seeks to fully implement the
obligations of Uganda under the Intergovernmental Agreement signed between Uganda and Tanzania and the Host Government
Agreement signed between Uganda and the East African Crude Oil Pipeline
"...some of the matters agreed upon in the Intergovernmental Agreement and the Host Government
Agreement... are either not covered by the existing law or are inconsistent with
the existing law. This Bill, therefore, seeks to complement the already existing
applicable laws by enabling aspects of the project that are inconsistent with
or not provided for under those laws,” reads part of the Bill.
The Host Government Agreement makes the
enactment of enabling legislation a pre-condition for its full effectiveness. Minister Okasai says that without the enactment of the EACOP Bill, the
Host Government Agreement would not be fully effective and it would not be possible to fully implement
the oil pipeline project in Uganda.
The lnter-governmental Agreement (lGA) is the
foundation of the oil pipeline project and marked the decision for both Uganda
and Tanzania to embark on developing the longest electrically heated crude oil
export pipeline in the world. These will be implemented alongside the Shareholders
Agreement which details obligations and shareholders structures, and the Tariff
and Transportation Agreement which is between the Pipeline Company and
the Shippers of Uganda’s crude oil.
The first commercial oil production in Uganda is
projected to start in 2025, roughly two decades after commercially viable
oil deposits were discovered. Once fully
developed, the 1,443-kilometre EACOP will transport crude oil from the oil
fields in the districts of Buliisa, Hoima, Nwoya, Kikuube to Chongoleani
terminal in Tanga at the Indian Ocean coast in Tanzania.
Uganda’s section of the pipeline project is about
296 kilometres running through 10 districts, 25 sub-counties, 172 villages and affecting
at least 4,121 persons. Construction works are expected to start in the second
quarter of 2022 in Tanzania where acquisition of land for project right of way
The project is expected to cost at least USD 3.8 billion (13 trillion Shillings) pooled through the EACOP
holding company that is co-owned by the oil companies- Total E&P and China
National Offshore Oil Company (CNOOC) and the governments of Tanzania and
Uganda through the national oil companies.
Some of the remedies proposed by the Bill are to provide for
the tariff regime applicable to the project during the different phases of operation,
like the construction period and operation period, enable government and the
Uganda National Oil Company to pay the transportation tariff in kind, ensure
that the EACOP project obtains the required authorizations in a timely manner, grant
and protect the land rights of the project including the enabling of the
government to support the project in the acquisition of land and others.
The others are defining the local content regime applicable to
the project and ensure that Ugandan citizens and enterprises optimally benefit
from the project through prioritization, ring-fencing and joint ventures among
others, guarantee third party access to the pipeline and define the tariff to
be paid by the third parties to ensure that crude oil from any future
discoveries can easily be commercialized and act as an incentive to encourage
further exploration in the country and others.
The proposed law also provides for decommissioning of the
project after cessation of activities, define the force majeure events
applicable to the project in cases of failure or delay in performance of
obligations arising from acts of god or related causes outside the control of
the party, provide for the procedure for transfer and assignment of rights and
obligations, ensure access to electricity by the project, enable the fiscal
regime for the project based on the incentives granted by the governments of
Uganda and Tanzania and others.