EACOP vs Lamu pipeline

EACOP: a landmark pipeline with in-country value​

Uganda
July 11, 2022
INTERVIEW

On all land and environmental issues, we have pledged to be transparent in what we are doing and how we are managing these subjects.
Martin TIFFENGeneral ManagerEACOP

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Martin Tiffen, general manager of the EACOP company, talks to The Energy Year about the next steps for the East African Crude Oil Pipeline (EACOP) and the role of social and environmental considerations in the project. Established in February 2022, the EACOP company is overseeing the development of Uganda’s landmark oil export pipeline.

What have been the key milestones leading to the incorporation of the EACOP company?
It has been quite a journey! The Tanzanian route was agreed between East African leaders at a summit in April 2016, and the signature of a set of common principles known as the Intergovernmental Agreement between Uganda and Tanzania in May 2017. There then followed a period of negotiation and alignment with the upstream projects (Tilenga and Kingfisher), the two States and the investors. The net result was that the legal and commercial framework of EACOP, including the two Host Government Agreements between EACOP and each State, the Shareholder Agreement, and the Transportation and Tariff agreements, which were finalised between September 2020 and September 2021.

The final step was some parliamentary legislation which was completed at the end of 2021, enabling EACOP to formally come into existence with its four shareholders (TotalEnergies at 62%, UNOC and TPDC at 15% each, and CNOOC with 8%) on February 15, 2022.

Looking ahead, what will be the next steps for EACOP?
Since February 15, EACOP has embarked on a number of parallel activities. These involve building up EACOP as an organisation fully capable of executing the project, including taking secondees from the shareholders, offices, IT services, etc.

Another key activity has been the land acquisition along the full right of way in both Uganda and Tanzania; this is now underway and will continue into early 2023. It is worth repeating that land acquisition will be done both in accordance with the laws of Uganda and Tanzania, and also in compliance with the Performance Standards of the International Finance Corporation.

The placing of all the main contracts and long-lead procurement items is something we have also been working on, as well as a series of workshops and roadshows to promote opportunities for local suppliers of goods and services, either directly to EACOP or via the main level-one contractors.

This is known as national content in Uganda and local content in Tanzania, but whatever its name we have agreed to ring fence certain activities for local enterprises, and formalised our commitments in the form of national/local content plans in each country. Concrete examples of this already include the land acquisition, associated house building and early civil works.

What role do social and environmental considerations play in the EACOP project?
We acknowledge that the project will have an impact on the communities and landscapes that it traverses, and we have committed to manage these on the same level as we do safety, the project itself and national content. It’s worth noting that the main disturbance will be during the construction phase, as once in operation the pipeline will be buried along its entire 1,443-kilometre length, with topsoil and vegetation reinstated. People and animals will be able to freely cross wherever they want. The main things visible will be the six pumping stations and the terminal and jetty in Tanga.

Altogether we have about 13,160 households who will be compensated by the project. Some 96% of them will be losing a part of their farmland (remembering that the pipeline is taking a 30-metre-wide “right-of-way” along its length), and they will be compensated at full replacement value for the land, crops, structures, trees, etc. so impacted. The vast majority will also receive transitional support in the form of food baskets, as well as livelihood restoration programmes.

The 4% whose primary dwelling is impacted are offered a choice of replacement housing or cash compensation, with almost all choosing the replacement house, complete with solar panels and rainwater capture and storage. In addition to the land acquisition teams, we have a network of community liaison officers who are in continuous dialogue with the households and villages along the route. We also have a grievance mechanism in place in order to be able to record and deal with issues as they arise.

On the environment, the project has followed the classical hierarchy of “avoid, minimise, restore, offset.” A great deal of work was done during the finalisation of the routing, integrating technical, social and environmental constraints to come up with a route of least impact. Thereafter we put in place various measures during the construction process such as narrowing the route to less than 30 metres in some specific environments to further minimise impacts. As already mentioned, we shall store and reinstate topsoil so that vegetation can be re-established.

To reduce our carbon footprint, we are complementing EACOP’s own power generation with solar power and grid connections, knowing that in Uganda the majority of electricity is hydro. And finally, where we do have an impact, we shall be taking measures to more than offset them elsewhere – for example by supporting some neighbouring reserves onshore and marine environmental initiatives in Tanga.

On all land and environmental issues, we have pledged to be transparent in what we are doing and how we are managing these subjects, and we also have third-party audits to ensure that we are complying with the stringent IFC Performance Standards.

How strategic is EACOP for Uganda and Tanzania?
The pipeline is part and parcel of the overall oil development; the Lake Albert upstream projects will produce the oil and EACOP will deliver it to international markets. We are opening a new corridor between two countries, including the laying of a fibre-optic cable, capacity in which we have offered to make available to third parties. The investment will stimulate both economies, provide opportunities to companies and individuals, and ultimately generate much-needed revenues for both host governments.

As such, we will bring in-country value to both Uganda and Tanzania. The inward investment and long-term revenue generation the overall Lake Albert developments will bring are very much in line with the development aspirations of the two host countries.

Uganda’s executives globetrot to drum up investor appetite for $4b oil refinery​

SUNDAY JULY 17 2022​

A crude oil refinery. Uganda is seeking funding to have its oil refinery up and running in 2027. PHOTO | AFP



By JULIUS BARIGABA
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Uganda government officials have been racking up air miles between Entebbe, Italy and US to strike a financing deal for the $4 billion refinery project.

Government officials admit that the refinery project has fallen behind others, and will likely come onstream late in 2027 at the earliest if the necessary financing is tied up and the pending technical studies concluded sooner.

As a result, local players that were primed to take up equity in the project as well as regional countries that expressed interest in the refinery that was sold as an East African Community (EAC) venture, remain non-committal, citing the project’s failure to take shape since 2018, when it was awarded to a consortium of investors.

Potential investors say they remain open to discussions with the government, but without an engineering, procurement and construction (EPC) structure, the refinery remains an unbankable project.

“The problem is that the refinery doesn’t have a structure yet — an EPC structure,” said Richard Byarugaba, managing director of the National Social Security Fund, a Ush14 trillion ($3.68 billion) Fund that the government approached in 2015 to take up stake in the project.

The NSSF, which traditionally invests heavily in fixed income assets, securities and real estate, has since 2017 been looking to diversify its investment portfolio by moving into private equity space in new areas especially oil and gas.

Officials in Kampala admit that the project has struggled to attract more interests and investment commitments from other EAC countries besides Tanzania and Kenya, who offered to take up part of Uganda’s 40 percent shareholding.

Indeed, Africa Intelligence news service reported last week that Uganda is struggling to garner enough enthusiasm from private sector partners to finance the ambitious project located at Kabaale in Hoima District in the west, and storage projects in Mpigi District, central Uganda, where refined products will be stored before distribution.

Regional stake​

On paper, Uganda remains with a 29 percent stake after Tanzania and Kenya take up their 8.5 percent and 2.5 percent shareholding respectively. Rwanda and Burundi declined participation in the project, while there is no local entity that has committed to take up shares.

“Now we have South Sudan and DR Congo as part of EAC; I am not sure if they will come onboard. But it’s useful for all [EAC] countries to participate,” said Peter Muliisa, chief legal and corporate affairs at Uganda National Oil Company (Unoc), a government entity that oversees its interests in the oil sector.

Unoc subsidiary Uganda Refinery Holding Company (URHC) is the government’s participating agency in the oil refinery project that is expected to produce 60,000 barrels of oil per day, including gas that will be sold in the regional market.

Since taking the $10 billion FID for Tilenga, Kingfisher and the East African Crude Oil Pipeline (Eacop) in February, Energy Minister Ruth Nankabirwa and government officials have been visiting Italy to negotiate with the lead investor Albertine Graben Refinery Consortium (AGRC) to get the project going.

Despite getting the refinery deal in 2018, AGRC remains domiciled in Italy, Mauritius and the US, forcing Ugandan officials to fly for negotiations of three critical commercial agreements, which include the shareholders agreement, the implementation agreement and crude supply agreements, expected to be finalised in six months, Mr Muliisa said.

The government subsequently contracted Foster Wheeler Energy from UK in 2009 to conduct a feasibility study for the development of a refinery in Uganda.

The study was undertaken between 2010 and 2012 and it defined the key aspects of developing a refinery in the country such as the size and configuration, its location and financing as well as the market for the products to be produced.

The study also confirmed the economic viability of refining petroleum in Uganda hinged on serving the Ugandan market and other East African countries.

Early FID​

Uganda Bureau of Statistics data indicate that Uganda’s petroleum consumption has been growing at around 7 percent with 37,000 barrels consumed everyday.

It was expected that FID for the refinery would take place alongside that of the upstream projects Tilenga and Kingfisher as well as Eacop in February this year, but experts argue that this would be risky for AGRC to commit to a project before assurance of crude oil production.

“I am delighted to work with AGRC, which started with the signing of the Project Framework Agreement (PFA) for refinery project on April 10, 2018. The refinery FID in the amended PFA was expected within 41 months from effective date of the agreement which falls on 7th February 2022,” said Ms Nankabirwa after meeting the consortium in Italy in February this year.

Early FID for the refinery would attract interest from new investors to the project, which has a post-tax internal rate of return (IRR) of 15 percent, but the committed parties remain the private investor — a consortium of four anchor investors, with a 60 percent of the project, and Uganda government that takes 40 percent, which is further shared amongst the EAC countries and other local participating investors.

The refinery is a point of contention between President Yoweri Museveni and the international oil companies that invest in Uganda’s upstream, which favoured the crude oil export pipeline as the best way to commercialise the resources from the Lake Albert projects.

Despite having not warmed up to the refinery, TotalEnergies, the biggest player in Uganda’s upstream and crude pipeline projects, later wrote to government offering to take up a 10 percent stake, but there has been no further commitment from the French giant.

The government in April 2018 selected AGRC, a consortium of Nuovo Pignone International SRL, a Baker Hughes General Electric Company located in Italy, Yaatra Africa and Lionworks Group Limited, both domiciled in Mauritius, and Saipem Spa of Italy, as the lead investor for the $4 billion project.

The government is represented by URHC, which holds a participating interest of up to 40 percent in the refinery and its attendant infrastructure, which includes a 211km refined products pipeline and storage facilities near Kampala.

Kenya and Tanzania will also participate through their investment vehicles.

Uganda government agencies are looking for about $480 million to $500 million for its stake, but officials say this could change depending on the project attracting new local and regional.

The $4 billion project will be funded through a debt to equity ratio of about 70:30, with the lead investor AGRC responsible for raising the $2.8 billion debt as loans for the project, while also contributing 60 per cent of the $1.2 billion in equity, the regulator Petroleum Authority of Uganda (PAU) explains.

The PAU is currently reviewing the refinery Front End Engineering Design (FEED) before making its final comments.

Uganda’s push for a refinery has history of abandoned efforts; in 2013, the government shortlisted several firms for the job, before awarding the tender in 2015 to Russian consortium, RT Global Resources, as the best preferred bidder.

However, Kampala kept South Korean consortium SK Energy on short leash as the alternative preferred bidder for the refinery job in case the Russians pulled out — a reality that came to pass in 2016.

SK Energy, was then handed the job, but the firm also pulled out citing the high risk of taking up 60 percent as the private lead investor, prompting a new tendering process that resulted in the 2018 selection of the AGRC consortium.

Aah wakunya mbona wamepotea

Ugandan MPs scan joint energy projects progress​

July 23, 2022

Felchesmi Mramba.

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By Guardian Reporter
News
The Guardian
Ugandan MPs scan joint energy projects progress
A DELEGATION of Ugandan MPs is in the country to assess progress made in the energy sector in preparations to transport crude oil from Hoima in north Uganda to the port of Tanga via the East Africa Crude Oil Pipeline (EACOP).

Felchesmi Mramba, the permanent secretary for Energy accompanied the visiting MPs led by the country’s Energy and Minerals minister, Peter Lokeris, to the Kinyerezi natural gas power generation project to start the familiarization tour. They will visit various energy projects with Kinyerezi seen as a game changer.

The team will also take an intense look at the transportation of crude oil from Tanzania to Zambia via the pipeline operated by the Tanzania - Zambia Crude Oil Pipeline (TAZAMA).

The delegation features MPs forming the parliamentary environment and natural resources committee with the Minerals Development state minister accompanying it, with other experts.

The minister remarked that Tanzania has a 50-year experience in crude oil transmission via the pipeline and is therefore the right place for the delegation to learn about the issue.

Tanzania also has experience in pipeline operation for natural gas, from Madimba area in Mtwara region to Kinyerezi suburb in Dar es Salaam for power generation.

Meanwhile, Tanzania is engaged in preliminary discussions for construction of a major natural gas pipeline from the same Mtwara location to a reception point in Uganda that wasn’t clear from initial reports. The MPs thought it was the right time to pick up a few elements of Tanzania’s experience in view of all these projects, they said.

Minister Lokeris expressed gratitude to the host authorities for agreeing to the crude oil pipeline project, as underlining the amicable relations existing between the two neighbours.

The pipeline will help Uganda boost its economy, as it will incur little cost to transport the crude oil compared to loading it on trucks, apart from the time advantage, he added.

















bado una ma-hope ya huu mradi?
CC: Tony254

MY TAKE
Is a partnership btn Tanzania and Uganda and Angola loading? Mind u Angola is to build a pipeline from Lobito to Lusaka and a rail connection btn Dar and Lobito exists and therefore a pipeline coating plant in Tabora can be useful to them too!