Despite Some Benefits, Tanzanian Pipeline Could Jeopardize Uganda’s Refinery Plan
The nation is keen for the D-day our now dozen year crude oil and gas will ever hit the international market. A ray of hope is cast on the recent agreement between Uganda and Tanzania for a yet new option of a joint pipeline from Hoima to the Indian-ocean port city of Tanga.
The Tanzania option offers vivid advantages and benefits the northern one through Kenya didn’t: more vigor from Dar-as-Salaam, less worries of al-shababa, shorter distance (1,200km vs 1,500km via north Kenya), over 1,000 jobs and of all reasons could break Tanzania’s chains over the progress of East African political federation.
In this light Dar could wave a green flag for the first tracking of the regional political unity—laying ground for president Museveni, as he promised to retire in Arusha-as maiden regional leader. Tanzania can also finally commit itself to some stakes in the proposed Ugandan refinery, to which hitherto is non-committal despite the offer remaining outstanding to all the now other five regional partners—South Sudan inclusive. But that’s all, period.
In the long run, however, Uganda opting for the Tanzanian route risks losing out from even greater benefits from a planned refinery. How?
Like Uganda, Tanzania is pacing to build a modern oil and gas refinery near Dar-as-Salaam. Like Uganda, the key actor in the Tanzanian project is RT Global Resources, a Russia-defense conglomerate of strategic several industries. Other members of the Tanzanian refinery project are Qatar and some companies from German.
Unlike Uganda, there is visible progress on the Tanzanian refinery project. Its budget of $6b versus ours in Hoima of $4bn is illustrative of the size and modernity it’s intended to be: huge and state of the art. The members in Dar, as it can clearly be imagined are ready to rock.
In Uganda, well, the site for the facility has been secured as part of our 40% commitment to the project. But the source of the other 0ver $1bn is a steep mountain to mount. World Bank, which had actually advised against this kind of investment, may not easily come forth with a grant. Though Kenya had offered to secure 2.5 of the stakes available, it might now negate in retaliation for our perceived negation on the MoU singed in August 2015 over the northern route option. Burundi doesn’t seem to see this as a priority while still in intense political/security conflicts.
Meanwhile, the main contractor RT Global Resources, who by the way, are also trying to outsource other investors in China and India to farm down some of their 60% shares, may be happy to route the Ugandan crude and feed the Tanzanian refinery where they are part of key owners. They anticipate other sources of crude to be the Middle East, which is quite a distance.
Besides, they will ask: what is the logic of two huge refineries in the same region? This is the time when Uganda will wish to invite the coming in of SK Engineering of South Korea, the second alternative to RT Global Resources, but in vain.
Oil as a resource is gradually losing attractiveness in international economies. In one of his moving campaign speeches in Washington D.C., Barack Obama on Jun 15, 2008 pledged to invest $150bn in a process that would secure America from being a hostage of OPEC in ten years. The budget would be used to explore all forms of alternative energy including solar, wind, biofuels, clean coal and nuclear energy.
He pledged building an alliance of oil importing nations to jointly work toward reducing their demand for oil and break the grip of OPEC on the global economy. This is believed to be part of the current ‘power Africa’ campaign being promoted by Washington and eight years down the road the effort is paying off in steadily making prices per barrel of oil nose dive.
Despite being bleak and the fact that we badly need our crude on market; we too deeply want the refinery. With it come a number of auxiliary infrastructures: a new airport, modern roads, and a finished product pipeline at Buloba near Kampala. These are essential in the tourism industry that is more enduring. But also we need diesel, kerosene and other plastic by-products of oil. Even America at some point in future will explore these products from their huge oil and gas reserves.
So at this upfront stage, government must push hard at the Russian contractors to get our refinery standing before they are drawn into excitement with the Tanzanian refinery. Else the South Korean alternative must be considered right away. In fact, this must feature upon the imminent visit of South Korean president Park Geun-hye to Kampala this year.