Suluhu Travels to Uganda as Partners Await Tanzania Decision on Oil Pipeline Shareholding

Tanzania President Samia Suluhu Hassan has left the country this Sunday morning enroute to Uganda on a one-day working visit.

Suluhu is expected at Entebbe International Airport at around 9:30am.

She will head to State House Entebbe for the launch of the Tilenga Development Project and the East African Crude Oil Pipeline (EACOP) projects.

By Saturday night, Ugandan and Tanzanian officials had concluded most of the intricate negotiations and technical processes to firm up the commercial and legal framework to make the US$ 3.5 billion pipeline project bankable and profitable.

The underlying principle in negotiating and concluding these agreements is to allocate risk to a party that is best suited to manage the risk.

ChimpReports understands that the Shareholders Agreement (SHA) which defines the rights and responsibilities of the shareholders in the EACOP project special purpose Vehicle Company, referred to as the EACOP Company (“EACOPCo.”) is yet to be fully concluded.

The shareholders are the Uganda National Oil Company (UNOC), the Joint Venture Partners (Total E&P Uganda Limited and CNOOC Uganda Limited) and the Tanzania Petroleum Development Corporation (TPDC).

Uganda may own up to 15% shareholding through UNOC, which is wholly owned by the Government of Uganda (GOU).

TPDC is considering taking shareholding of up to 15%, which would leave the JVPs with 70%.

By Saturday night, Tanzanian officials were yet to give commitment on its planned stake in the oil pipeline project, saying the decision will be announced by President Suluhu today.

If Tanzania takes 15%, Suluhu’s government will inject $600m into the oil pipeline project.

Sources said French oil giant Total’s chief executive and board chairman, Mr Patrick Pouyanné was expected to arrive in Uganda this Sunday morning by private jet for the Entebbe ceremony.

“All the investors (Total E & P and CNOOC) want is Tanzania to decide on its shareholding so they can take the Final Final Investment Decision (FID) and raise capital for the implementation of the oil pipeline,” said a reliable source informed about the negotiations.

State House meeting

On Friday April 9,  President Museveni said he held discussions with “High Powered Special Envoys sent by the President of Tanzania ahead of the Tripartite meeting scheduled for Sunday.”

Museveni emphasized: “We discussed among others; issues to do with land compensation during the oil pipeline construction.”

During the meeting, Museveni asked Tanzanian officials led by Energy Minister Medard Kalemani and Justice Minister Palamagamba Kabudi about their country’s shareholding plans but didn’t obtain a clear answer.

The officials insisted the decision on Tanzania’s stake will be announced today by President Suluhu.

The SHA defines many aspects of “EACOPCo.”, including the funding of shareholding, financing of debts and general governance of the company (voting rights, decision making, management, transfers and defaults).

Importantly, the SHA also defines the treatment of historical costs, which are costs incurred by all shareholders in relation to the development EACOP project, prior to the incorporation of “EACOPCo.”

UNOC is leading the negotiations of the SHA, on behalf of the GOU, in consultation with the Ministry of Energy and Mineral Development and Ministry of Finance, Planning and Economic Development.

History

Kabudi yesterday (Saturday) said the planned signing ceremony is a “historic moment” for both Uganda and Tanzania.

He said on April 11, 1979, Tanzanian forces and exiled Ugandan fighters defeated Idi Amin before capturing Kampala.

“It was a military victory for the people of Uganda and Tanzania,” said Kabudi, adding, the realization of the oil pipeline project on April 11, 2021 would amount to “economic liberation” of both countries.

He said putting proceeds from the oil project to good use would lead to economic transformation of Tanzania and Uganda.

Kabudi said Tanzania’s former President Julius Nyerere planned to construct a railway line connecting Tanga Port through Serengeti National Park to Lake Victoria to ease movement of goods and services between the two countries.

Uganda’s Energy Permanent Secretary Robert Kasande said over $20bn will be pumped into activities related to the oil pipeline project, making it the largest investment in Uganda’s history after the $1.5bn Karuma hydro power project.

FID

Uganda expects to close the long-awaited Final Investment Decision (FID) with the international oil companies — France’s Total E&P and China’s Cnooc this month (April).

Closing FID means launching Uganda’s oil project to the next development and construction phases, and subsequently starting of commercial oil production, tentatively, by 2025.

The anticipated benefits of the project include job creation, local content, new infrastructure, logistics development, technology transfer and enhancement of the trade corridor between Uganda, Tanzania, East Africa and internationally.

The East African Crude Oil Pipeline is a 1,443km crude oil export infrastructure will transport Uganda’s crude oil from Kabaale – Hoima in Uganda to the Chongoleani peninsula near Tanga in Tanzania for export to the international market.

The post Suluhu Travels to Uganda as Partners Await Tanzania Decision on Oil Pipeline Shareholding first appeared on ChimpReports.

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