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Pipelines and progress in East Africa’s multi-speed energy markets

By Morris Kiruga, in Nairobi
Posted on Wednesday, 11 September 2019 09:42, updated on Thursday, 12 September 2019 11:10

A tanker truck that used to haul oil products, carries crude oil during a pilot scheme to export crude oil, as it arrives at the Kenya Pipeline Company in the port city of Mombasa, Kenya June 7, 2018. REUTERS/Joseph Okanga

Several East African countries, including Kenya, South Sudan, Tanzania and Uganda, are laying the groundwork to join the ranks of oil-exporting countries.

But some are more successful than others.

  • Kenya sold its first shipment of oil in late August for $12 million, but it’s still years away from turning oil exports into a viable commercial venture.
  • The Uganda-Tanzania Crude Oil Pipeline project has been suspended over a disagreement on the financial structure of the deal.
  • South Sudan discovered a small oil field in the Northern Upper Nile State, the first in the country since it seceded from Sudan 8 years ago.


Full oil production is expected to start in 2022. The current sale of crude oil is part of an Early Oil Pilot Scheme, testing the market’s response to Kenyan oil. However, an industry lobby group has criticised the Early Oil Pilot Scheme, calling it “a money-losing venture”.

  • “We are now an oil exporter,” said President Uhuru Kenyatta after flagging off the country’s first shipment of 200,000 barrels of oil. The tanker, MV Celsius Riga, carried the shipment to Malaysia. The oil was trucked from Turkana in northern Kenya to the coast, and sold to a Chinese company, ChemChina. Kenya plans to sell at least six consignments.

Kenya is planning to build a new oil pipeline next year, while London-based Tullow Oil uses its convoy of trucks to transport oil until 2021. The pipeline will connect the Lokichar Basin to Lamu Port, and is one of the major LAPSSET (Lamu Port-South Sudan-Ethiopia-Transport) Corridor projects.

  • The country “needs more commitments on land and water to… move faster with everything,” according to John Munyes, the Petroleum Cabinet Secretary.

In September, Kenyatta promised that the port’s first berth will be opened in October. Two more berths are expected to be complete by 2020. The port will have a total of 32 berths. The project is due for completion in 2023 unless it runs into further delays.

Kenya also plans to build a new refinery in Lamu to replace the one in Mombasa that was closed in 2013.


French oil giant, Total has suspended work on the Uganda-Tanzania pipeline due to a tax dispute with the Ugandan government. The $3.5 billion pipeline will link Uganda to the Indian Ocean, via the Tanzanian port of Tanga. It will cover 1,445kms. It will also be the longest heated oil pipeline in the world.

  • Work on the pipeline was suspended “after Tullow Oil’s plan to sell a stake in the project to France’s Total and China’s CNOOC was called off,” according to a Reuters report.  

Uganda discovered oil reserves more than a decade ago, but has not joined the league of oil exporting countries because of lack of infrastructure.

In 2015, Uganda chose Tanzania over Kenya for its oil pipeline, citing concerns of land compensation issues that could potentially delay construction.

Total as the lead developer of the project, said that negotiations for the Sale & Purchase Agreement had stalled because “no agreement on the fiscal treatment of the transaction has been reached”.

Uganda is demanding $185million, in addition to a prior tax bill of $167million, in capital gains tax. Tullow intended to sell 21.5% of its stake in Uganda to its partners, Total and China National Offshore Oil Corporation (CNOOC).

  • “It is disappointing to report this news at a time when we are making so much progress elsewhere towards the growth of the Group with our recent oil discovery in Guyana and the first export of oil from Kenya,” said Tullow CEO Paul McDade.

Total and CNOOC fired their staff after the deal collapsed in late August, according to Ugandan media.

On September 8th, Tanzania’s President John Magufuli rebuked his Ugandan counterpart, Yoweri Museveni over the delay, saying he has to “sacrifice short term gain and go for long term gold,” according to a report by ‘The Observer’.

Tanzania will host up to 80% of the pipeline infrastructure, but will only take a 5% stake in the East  African Crude Oil Pipeline (EACOP). Others with a stake in the pipeline include Uganda(15%), Tullow Oil (10%), Total (35%), and CNOOC(35%).

  • “Tullow is still willing to sell its stake and Total and CNOOC still want to buy,” Peter Mulisa of Uganda National Oil Company told ‘The East African’.

Uganda and Tanzania are expected to export oil by 2023. Uganda’s refinery will also be complete and will require access to markets in the region. The East African community first approved the greenfield refinery more than a decade ago. It will allow Uganda to sell oil products to her neighbours.


South Sudan is currently an oil-exporting country, and the world’s most oil-dependent economy. It recently discovered a new field in the Adar area, containing over 5 million barrels of recoverable oil. Juba is hoping to make more oil discoveries, as it works to restore its oil production to pre-war levels of 350,000 to 400,000 barrels per day.

South Sudan is also planning to build a refinery near its border with Ethiopia as it works to reduce its dependence on Sudan for export infrastructure.

Other pipelines that might come up include the Kenya-Uganda-Rwanda pipeline, which currently terminates in the town of Eldoret in the Kenyan Rift Valley.

Bottom Line: The development of East Africa’s oilfields will transform the region’s economy, and its relationship with other oil-producing countries. Guessing who will win the win the race to become the first substantial exporter is less obvious.







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