Posted with permission from allAfrica.com

The business dynamics of Uganda's oil industry will take a slight shift if the country decides to take up a stake in the crude oil pipeline from Hoima to the Chongoleani peninsula near the Tanzanian port of Tanga.

Uganda and Tanzania intend to take up a combined stake of between 20 per cent and 25 per cent in the crude oil pipeline, four years after the country re-affirmed that the oil pipeline would be a purely private sector-led venture.

Ugandan ministry of energy officials said at the time that they were only committed to building an oil refinery.

Also, it has emerged that the pipeline will take up more oil than earlier thought. Earlier estimates put the amount of oil that would be piped out of Uganda at 120,000 barrels per day.

That figure would then go up with more discoveries although it was pointed out that the refinery would take priority. But with progress on the refinery moving at a slow pace, priority is being given to the crude oil pipeline, with the amounts to be exported shooting to above 200,000 barrels of oil per day.

Discussions are already underway on the amount of money Uganda and Tanzania will put in the project, with the schedule for signing up the first round of funds set for June 2018.

"Still under discussions but they both (Uganda and Tanzania) intend to take up 20% to 25% combined. Equity not due till June next year; so, there is time," Patrick Mweheire, the chief executive of Stanbic bank Uganda, one of the institutions that will arrange the debt for the pipeline, said.

The two countries will acquire and avail land for the 1,445km pipeline project, and offer security for it, although it is not clear whether this will form part of the value of their equity.

In Uganda, the pipeline, which will be buried underground to minimize the impact on the environment, will run through 24 sub-counties over a distance of 296km, pumping 216 barrels of oil per day.

Due to Uganda's waxy crude oil, the project will be the longest heated pipeline in the world. Total E&P, Cnooc, and Tullow Oil - the three main joint venture firms operating in Uganda - will contribute $1bn of equity in the crude oil pipeline project, while Stanbic bank and Japan's Sumitomo Mitsui will arrange the other $2.5 billion to $3 billion from a group of international lenders.

Mweheire said: "This will be an attractive dollar-based project finance with very solid off-takers (Total, Cnooc and Tullow) sending the crude through the pipeline at roughly $12 per barrel." He added: "The joint venture partners will put [in] roughly $1bn of equity."

Mweheire said they will try and shore up finance from Chinese and European lenders.

"We will talk to the Chinese and Europeans and some export credit agencies. We are very optimistic and we will be able to share more towards the end of the year," he said.

On their partnership with Sumitomo, Mweheire said: "We are joint lead arrangers and will work with Sumitomo to bring in all the lenders. We complement one another through our joint contracts and structuring; we will close it."

Construction of the pipeline is expected to start after the three oil companies complete the Final Investment Decision, which is expected to be in the second half of 2018. Thereafter, construction of the pipeline is expected to take about 36 months.

Currently, Gulf Interstate Engineering (GIE) of Texas is working on the Front End Engineering Design (FEED) for the pipeline.

The FEED basically shows the technical work needed and the cost of pulling off a project. Irene Muloni, the minister of Energy and Mineral Development, recently told parliament that the FEED for the nine production wells that were licensed is ongoing.

The FEED for the Kingfisher field development area, which is being operated by Cnooc, together with that of the fields in the Kaiso-Tonya area is expected to be completed by the end of this year, she said.

The FEED for the other seven (7) production licenses located in Buliisa and Nwoya districts (the Tilenga project, which is some- times known as the Northern Lake Albert Upstream Project), is also expected to be concluded in June 2018.

Muloni also said the field development plans for the three discoveries, namely Jobi-East, Mpyo and Lyec, are being discussed between the government and the companies with the intention of issuing more production licenses.