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New Hoima-turkana pipeline proposed

By Vision Reporter

Added 31st May 2013 04:23 PM

Looking for oil is not an easy venture. It is an expensive and highly risky business game. However, the rewards are high. International oil companies have invested close to $2.5b in exploring for the hydrocarbons in Uganda for 15 years.

New Hoima-turkana pipeline proposed

Looking for oil is not an easy venture. It is an expensive and highly risky business game. However, the rewards are high. International oil companies have invested close to $2.5b in exploring for the hydrocarbons in Uganda for 15 years.

By Ibrahim Kasita
 
Looking for oil is not an easy venture. It is an expensive and highly risky business game. However, the rewards are high. International oil companies have invested close to $2.5b in exploring for the hydrocarbons in Uganda for 15 years. 
 
With a commercially-established petroleum resource asset base of about four billion barrels in reserves, the firms have planned for an early payback period to not only repay the total investments, but also ensure stable cash flows.
 
“They (the oil companies) want to get their money quickly. They prefer exporting the crude oil to the international market by pipelines,” Peter Lokeris, the state minister of energy and mineral development, explained.
 
However, the “holistic” plan is to first get a small refinery (30,000 barrels per day) up and running with interconnecting pipelines from the oil wells to the power plants, the central processing complex.
 
The pipelines and the related infrastructure will have options for crude oil surplus exports to the Indian Ocean to deliver crude destined to the world markets.
 
The first export route the oil firms envisaged was a 1,300km pipeline stretching from the Lake Albert basin all the way to Kampala, Kisumu, Nairobi and Port Mombasa of Kenya estimated to cost about $4b.
 
This was going to be an expensive venture which would make Uganda’s crude oil less competitive compared to the global market, making domestic refinery the most profitable venture.

Economies of scale
The discovery of some oil deposits in Kenya’s Turkana basin by the same company operating in Uganda –Tullow- has changed the crude oil export strategy. The discovery is still in early stages for commercial feasibility.
 
South Sudan, Ethiopia and Kenya have partnered to develop the proposed Lapsset Corridor project that will see the construction of a modern port in Lamu, a Kenya-South Sudan oil pipeline, a railway line and highway through Ethiopia and an oil refinery.
 
Tullow and partners are now pushing for an oil pipeline that will start from Hoima (where the refinery and power plant will be put up) to Lira, then Moroto before connecting to the Turkana basin for onward transmission to either Mombasa Port or Port Lamu.
 
Then, another pipeline from Juba will be constructed to Turkana.
This proposed export route plan is set to shape regional politics and Uganda’s future relations with its neighbours, especially Kenya, South Sudan, Sudan, Ethiopia and even Tanzania, Rwanda, Burundi and DR Congo.
 
Game changer
But massive expansion will demand massive investment and massive improvement in business conditions for foreign investors, including harmonised East African Community (EAC) investment and exploration rules to give investors legal mechanisms for prospecting, building and transporting across national borders.
 
Special legal and fiscal regimes have already attracted an increase in exploration bids but there is much to be done, especially for other kinds of businesses that do not involve hundreds of millions of dollars.
 
There must also be direct benefits to those living on the land that the pipeline will go through, rewarding them for their property, separately from the royalties going to the government, in order to empower individuals, not just the state. 
It is people, not governments, who create economic activity.
 
Governments must also remove the obstacles to creating and running businesses so everyone can benefit from the promised EAC free market.
 
EAC members must live up to their promises of allowing region-wide free trade and movement for all products and services, so efficient markets can develop rapidly, not just in oil.
 
Energy could drive robust and sustainable economic growth in East Africa, but only if coupled with economic freedom, lower corruption and better business conditions for all. 
 

 

New Hoima-turkana pipeline proposed

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