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Uganda, DRC Ministers Intensify Crude Oil Pipeline Negotiations

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The ministers were reviewing progress towards cooperation in the hydrocarbon sector including the East African Crude Oil Pipeline Project EACOP.
25 Nov 2017 06:43
The East African Crude Oil Pipeline could have DRC as its third partner country

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Energy and Mineral Development Minister, Engineer Irene Muloni and DRC's Minister for Hydrocarbons, Professor Aime Ngoi-Mukena held bilateral talks in Kampala on Friday over the interest by DRC to join the East African Crude Oil Pipeline.

The ministers were reviewing progress towards cooperation in the hydrocarbon sector including the East African Crude Oil Pipeline Project (EACOP).

One of the silent features of the cooperation is to minimize the potential border conflict between the two countries over the oil found at either side of Lake Albert through joint exploration and transportation of the crude oil through the same pipeline.

But Muloni in a statement issued after a day-long bilateral meet at Sheraton attended by technical experts from the two countries insisted that they focused on the progress of the East African Crude oil pipeline.

Prof. Mukena said the DRC authorities were committed to working with Uganda and East Africa at large on the possibility of jointly exploiting their hydrocarbon resources.

DRC currently also has an agreement with Rwanda to jointly explore for oil and gas in Lake Kivu area.

Muloni said the deal between the two countries is likely to succeed. The oil in Uganda and DRC is waxy and of low-sulphur crude more suited for onsite refining than pipeline transportation.

Also at the core of the discussion was how much  DRC would pay for transporting its crude oil through Uganda to the port of Tanga in Tanzania. The agreement between Uganda and Tanzania allows Uganda to transport its crude at  USD 12 per barrel.

Engineer Muloni was optimistic that they will come to an agreement since the oil discovered  DRC is of the same character with that in Uganda and therefore the same crude oil pipeline can be used to transport it for export. 

 

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Muloni compared the East African Crude Pipeline to a road saying it needs more users in terms of traffic for it to make economic sense.

 

She says the more the crude oil pumped through the pipeline for the export market the better so that it becomes busy and efficient.

 

Uganda and the Democratic Republic of Congo have a Joint Permanent Commission and they have also set up a joint technical Committee to coordinate negotiations that will eventually see DRC as part of the East Africa Crude Oil Pipeline.

 

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No timeline has been set for DRC to join Uganda and United Republic Of Tanzania for the construction of the pipeline. It is anticipated that ongoing talks could have DRC joining before the end of 2018.

DRC is said to be the second largest crude oil reserves in Central and Southern Africa after Angola. Its reserves are located in the four major lakes bordering Tanzania, Burundi, Rwanda, and Uganda.

Muloni says the two countries could also jointly explore for oil across their borders as a means of lowering exploration costs.

The DRC has proven reserves of 180 million barrels, though estimates of total petroleum reserves exceed 5 billion barrels.

Uganda is currently in the development phase of its budding oil industry, with first oil planned for 2020. Over 6.5 billion barrels of oil resources have been discovered in 40 percent of the explored area in the Albertine Graben.

The East African Crude oil Pipeline will be developed as a private project. Muloni says the government eager to enter into arrangements that will make the project less costly to Uganda since the money has to be repaid to the investors.

The National Oil Company (NOC) will have a stake in the pipeline being the business arm of the government in the oil and gas sector.

There are discussions between Uganda and Tanzania towards the establishment of a Special Purpose Vehicle to be known as Pipe Co to construct, own and operate the East African Crude Oil Pipeline (EACOP).

Uganda and Tanzania sign Inter Governmental Agreement for Crude Oil Pipeline 1445 Km pipeline to be developed from Hoima in Uganda to Tanga in Tanzania.

 

The EACOP Project consists of a 1445km, 24-inch crude oil pipeline that will be constructed at an estimated cost of $3.5 billion shillings. Some estimates say the cost could shoot up to$5 billion.

 

The final cost will be determined after Gulf Interstate Engineering, the consulting group procured to undertake Front End Engineering Design study (FEED) submits a report on the specifications and costs of the pipeline. The FEED study according to sources at the Ministry has been finalized though not yet handed over to the government.

 

Currently, there are efforts by Standard Bank Group Ltd or Stanbic Bank to raise USD 3.5 billion (over 12. trillion Shillings)  for the construction of the crude oil pipeline by the second half of next year as Uganda prepares for first oil production by 2020.

 

Stanbic Bank is working with Sumitomo Mitsui Banking Corporation Europe Ltd (SMBCE), an affiliate of the Sumitomo Mitsui Banking Corporation (SMBC) to advise on sourcing of financing and assessing anticipated costs and benefits of funding the East African Crude Oil pipeline.

 

Muloni believes the earlier DRC joints the fray, the better and higher chances of raising the needed money for financing the pipeline project to benefit the three countries and the Banks too.

 

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Congolese oil production is limited to the Coast Basin, yielding 25,000 barrels per day of offshore production, all of which are exported.

DRC has an option of transporting its crude oil through a 6,500km-long pipeline running west to the Atlantic coastline but the route will be longer compared using the East African Crude Oil Pipeline.