Uganda, Tanzania sign new crude oil pipeline deal

Uganda and Tanzania have signed an agreement to fast-track the implementation of a crude oil pipeline project of around 4 billion US dollars. The agreement brings the two countries closer towards the commercialization of an estimated 6.5 billion barrels of crude oil resources in western Uganda.

Uganda’s Minister of Energy and Mineral Development, Irene Muloni, says they want to fast-track the process to meet the deadline of 2020 when the first drop of oil is expected.

“Now that we have laid the foundation, we need to make sure that things move and really move faster so that we are able to achieve the timeline of first oil in 2020,” Muloni told CGTN Africa.

An oil exploration tower in Tonya, Uganda /VCG Photo‍

Tanzania’s Minister of Constitutional and Legal Affairs, John Kabudi Palamagamba, said the project will boost the economies of both countries.

“The signing of the inter-governmental agreement between Uganda and Tanzania is significant in the sense that the construction of the pipeline is going to create jobs. Secondly it is going to sustain livelihoods of people throughout the route where it will pass.”

French oil firm Total E&P is the lead partner in the crude oil export pipeline. The pipeline, 24 inches in diameter, covers a distance of over 1,400 kilometers from Uganda’s western district of Hoima to Tanga Port in Tanzania.

When completed, it will be longest heated pipeline in the world. The new agreement now awaits ratification from the parliaments of both Uganda and Tanzania to be legally binding.

Source: CGTN Africa

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Uganda has unveiled plans to become East Africa’s top electricity producer

Uganda has unveiled plans to become East Africa’s top electricity producer through the development of some hydropower stations.

“Our strategy is to develop half a dozen hydropower stations on the Nile,” Ibrahim Kasita, Uganda’s director of communication in the ministry of energy and mineral development told African Business Magazine. In addition to the three existing hydropower stations – Owen Falls Dam, Nalubaale Power Station and Bujagali Falls Power station – all located near the source of the Nile in the industrial town of Jinja, the East African nation is planning to build more power projects in the Nile valley.

The entire cost of developing the planned hydropower projects along the Nile Valley is yet to be established, however, feasibility studies for some of the power stations is already underway. By 2019, Uganda, which currently generates 900MW of electricity, will see its power output outstrip that of Kenya and Tanzania, whose current output is 1,560MW and 1,200MW, respectively.

Uganda will add another 800MW to its current output through the development of the Ayago Hydropower project. The funding for the Ayago project – which will push the country’s electricity output to 1,700MW by the end of next year – will mainly be financed by Chinese investors, according to Kasita.

“The Chinese government has shown commitment to help Uganda develop the country’s hydropower potential along the Nile Valley,” he said. “We expect Beijing to fund these projects.”

Previous attempts

The previous privatisation policy aimed at attracting investors to exploit the vast hydropower potential on the River Nile valley failed in the early 1990s because the economy was in doldrums following the political violence of the 1980s. But after 1995, political stability spurred the economy to grow at an average rate of 6%, leading to the soaring of electricity demands.

However, President Yoweri Museveni’s government at the time could not raise the necessary funding to expand Uganda’s electricity output to meet demand. Instead, the state persuaded Industrial Promotion Services (IPS), which is owned by Kenya-based Aga Khan Fund for Economic Development, to build the $900m Bujagali Power station, which was constructed in 2007 and commissioned in 2012.

Funding for the project came from IPS, US-based Sithe Global Power LCC, International Finance Corporation (IFC), African Development Bank (Afdb), European Investment Bank and other financial institutions. The involvement of the various multilateral financial organisations, however, effectively drove electricity prices for consumers to $0.11/kwh, which made Uganda’s industrial output uncompetitive compared to other East African countries, such as Kenya, which charged customers about $0.075/kwh for electricity. Electricity prices in Uganda fell to 0.072$/kwh in 2016, after the government renegotiated loan terms with the Bujagali financiers.

Following the difficulties of the Bujagali power station, the Ugandan government has sought to negotiate bilateral arrangements with the government of China for long-term soft loans to ensure electricity prices are kept low.

Chinese finance

 Under the deal with China’s Exim bank, Uganda’s government has secured long-term concessionary loans to fund the development of its various hydropower plants. The $1.44bn 600MW Karuma project to be commissioned next year and the $590m Isimba 188MW power project to be commissioned at the end of this year are both funded through soft loans from the Chinese Exim Bank with the Chinese government guarantee.

Uganda plans to export electricity from the Ayago hydropower to Democratic Republic of Congo (DR Congo) and South Sudan, while the combined power from Jinja region, specifically from the Owen Falls Dam (managed and maintained by South Africa’s Eskom), Nalubaale and Bujagali, which will produce a combined total of 800MW, will be exported to Kenya, Tanzania and Rwanda. Uganda currently exports 50MW to Kenya under a colonial agreement signed in 1956. The East African nation also exports 8MW to Tanzania.

Solar projects

Uganda has also invested in developing the country’s solar energy capacity. East Africa’s biggest $19m solar plant with an installed capacity of 10mw has been built in the eastern town of Soroti.

Made up of 32,680 photovoltaic panels, the new 10-megawatt facility is the country’s first grid-connected solar plant. The project was developed under the Global Energy Transfer Feed-in Tariff (“GET FiT”), managed by Germany’s KfW Development Bank in partnership with Uganda’s Electricity Regulatory Agency (ERA) and funded by the Governments of Norway, Germany, the United Kingdom and the European Union.

–Africanbusinessmagazine | Epajjar Ojulu

Chinese firm secures $2.3bn contract to build MoKaKi railway section in Uganda

China Harbour Engineering Company (CHEC) has signed a contract to build the section of the MoKaKi railway between the Kenyan border and Kampala, which will require a $2.3bn investment.

MoKaKi is the new name for the standard gauge railway (SGR) that is expected to run from Mombasa, through Nairobi, to Kampala and on to Kigali. China Road and Bridge Corporation has now completed 98% of the first section, between Mombasa and Nairobi.

Kampala had signed a memorandum of understanding with China Civil Engineering Construction Corporation in 2012 for the section of line in eastern Uganda. However, it has now opted for CHEC to build the line between the Kenyan border and the Ugandan capital. Export-Import (Exim) Bank of China is to provide most of the $2.3bn investment that will cover engineering works, line construction and the purchase of rolling stock.

For its part, the government of Uganda will provide 15% of the money, possibly through a commercial loan, plus the land required for construction. The Ugandan government has announced that it has already acquired 60% of the land required to build the 273km section. The first trains are due to run in mid-2020.

A separate contract will be awarded for the section of line between Kampala and the Rwanda-Uganda border at a later date. That stretch will cover roughly the same length as the section in eastern Uganda. This contract is unlikely to be awarded until Rwanda commits to extending the line on to Kigali. In addition, another section of railway is expected to link the MoKaKi line in Uganda with the South Sudanese capital of Juba.

Faster transit

Project coordinator Kasingye Kyamugambi said: “As soon as studies are complete and approved, and funds secured, works on the other sections of the SGR will commence.” The main motivation for the development of the new railway is to reduce the time and cost of transporting freight to and from Mombasa. The Ugandan government believes that freight transfer by the new railway will be just one third of the cost of existing road and rail transport.

Passenger services are to be launched on the 457km section between Mombasa and Nairobi later this year, taking four hours on express trains that will only stop once en route, and five and half hours by country trains, which will stop seven times: at Mariakani, Miasenyi, Voi, Mtito Andei, Kibwezi, Emali and Athi River. The first six locomotives for use on the line were delivered in January, with another 50 to be commissioned this year and next. Freight trains will take between six and eight hours to reach Nairobi from Mombasa, in comparison with the 20 hours it takes to transport containers by road.

Rift Valley Railways

The future role of the existing railway along the same Mombasa-Nairobi-Kampala route, which was built in the British colonial era, has yet to be determined. The railway has been operated since 2006 by a private company, Rift Valley Railways, under a 25 year concession. In December, Nairobi finally compensated RVR for damage and losses incurred during the post-election violence of 2008.

The main shareholder in RVR, Egypt’s Qalaa Holdings, announced in January that it would sell its 73.76% indirect holding in the company. A Qalaa spokesperson said: “The decision to divest from RVR comes in the wake of management’s conclusion that additional capital is required to complete RVR’s transformation programme, which has already yielded positive results according to recent operational performance reports.” The company “will continue to provide operational and managerial support” while it seeks a buyer for its stake.

It is possible that the RVR line could find a role offering lower price passenger services over short distances. However, if the projections on price and speed are correct, then it seems unlikely to retain a role as a freight utility, particularly as it has lost out to road haulage even before the new railway has been built.

–Neil Ford, africanbusinessmagazine.com