Tanzania and Uganda on Sunday signed an agreement for the construction of a crude oil pipeline, at an estimated cost of $3.5 billion, which will run from Ugandan oilfields to the Tanzanian port of Tanga. The signing ceremony was attended by President John Magufuli and Uganda’s Yoweri Museveni.
This comes days after French oil company Total reached an agreement with Uganda to protect its rights and obligations in the pipeline’s construction and operation, known as the host government agreement.
Total is the major shareholder in Uganda’s oil fields after agreeing in April to buy Tullow Oil’s entire stake in the jointly held onshore fields for $575 million. It is heading the project alongside China’s CNOOC and the government.
A Tanzania government spokesman Hassan Abassi said on Twitter that 80 percent of the pipeline will run through Tanzania. Once in place, the construction is expected to earn Tanzania 7.5 trillion shillings ($3.24 billion) and create more than 18,000 jobs over the next 25 years.
Although a date for the construction has not been given, Uganda officials believe that it would take between two to three years to complete and requires that the planned 1,445-km (900-mile) East African Crude Oil Pipeline be in place to start commercial production.
Both countries are expected to fund between 30 to 45 percent of capital expenses through their respective national oil companies, Uganda National Oil Company and Tanzania Petroleum Development Corporation.
Uganda discovered oil reserves in 2006 and has approximately 6.5 billion barrels of oil reserves. of which 2.2 billion are recoverable with at least 1.4 billion estimated to be economically recoverable.