French firm Total E & P announced the suspension of all work related to the building of the East African Crude Oil Pipeline (EACOP). The decision came after British firm Tullow announced a collapse of negotiations for sale of some of its shares to Total and the Chinese National Offshore Oil Company (CNOOC). The companies have equal shares of 33.3 per cent. The failure of the negotiations between Tullow Oil and joint venture partners Total E & P and CNOOC is a setback for Uganda’s oil projects. Uganda discovered crude oil reserves about 13 years ago but commercial production has been delayed partly because of a lack of infrastructure like an export pipeline. Uganda government officials expressed the hope that the deal will be salvaged and they will be able to deliver the first oil within the set timelines. “It is just a question of aligning a few issues,” says Peter Mulisa of Uganda National Oil Company.
The stalemate between the main investors and the collapse of the negotiations will have ripple effects. It is expected to impact debt financing of approximately $2.5 billion for the pipeline currently being arranged by Stanbic Bank Uganda and Sumitomo Mitsui. Other local and international investors will also be affected..
EACOP, 1,445km export pipeline can transport Uganda’s crude oil from Kabaale, to Chongoleani peninsula, near Tanga port in Tanzania. The 24-inch diameter pipeline, costing $3.5 billion has the capacity to export at a flow rate of 216,000 barrels of crude daily.
Almost 80 percent of the infrastructure is hosted by Tanzania and therefore, has the biggest share of contractors. The managing director of Tanzania Petroleum Development Corporation, James Mataragio, remarked that “Discussions are in progress between all the stakeholders and we expect them to reach an agreement that will allow the project to proceed as planned,” Dr Mataragio said .On the Tanzanian side, Tanzania Petroleum Development Corporation is the main supervisor of the EACOP project. As per the memorandum of understanding, the pipeline will be constructed and operated through a company with shareholding from TPDC, the Uganda National Oil Company, and all three main investors — Total, Tullow and CNOOC. On August 29, Tullow called off the Sale and Purchase due to a tax dispute with the Ugandan authorities.
