Page 11 - DMEA Week 30

DMEA PiPelines DMEA
Host-government agreements (HGAs) between the two authorities and the three IOC stakeholders were envisaged being signed last year, as a prelude to an FID. However, several di erences then emerged.
e oil companies were reported to be push- ing for a higher tari than the $12.2 per barrel originally agreed, while Tanzania’s President John Magufuli was rumoured to be reneging on some of the nancial incentives pro ered in order to sway the parties away from a provision- ally agreed route through Kenya.
Sweeteners included a 10-year corporate income tax holiday and a three-year waiver of VAT. Talks between the two governments held in Kampala in January postponed the target date for signing the HGAs until June.
However, in late April, a bone of contention over where any disputes between the stakehold- ers would be arbitrated was settled in favour of London. East African Crude Oil Pipeline was registered in the UK in April last year. In Febru- ary, the government formally postponed the date for rst crude yet again until 2022.
Expropriation clauses are reported to be a key sticking point, as investors seek to safeguard the land used for the pipeline against any attempt to reclaim territory by the host countries.
An environmental and social impact assess- ment (ESIA) submitted to Tanzania’s National Environment Management Council has also yet to be approved.
e incentive for bringing pipeline talks to a conclusion was strengthened in late April when Uganda’s National Environment Management Authority approved the ESIA for the Total-led Tilenga project.
is will deliver 170,000 bpd of the 230,000 bpd to be produced by that scheme and the CNOOC-led King sher project. e two com- panies are shareholders in both projects, which are being pursued in tandem.
Total is leading the pipeline’s construction and received bids last year for the EPCM con- tract, with the UK’s Penspen and Australia’s WorleyParsons the favourites.
Sumitomo-Mitsui Banking Corp. (SMBC) and South Africa’s Standard Bank are the nan- cial advisers and lead managers on a debt pack- age expected to cover around $2.5bn of the estimated $3.5bn project cost.
Nairobi and Tullow were forced by Kampala’s late change of heart to initiate the development of a pipeline solely for the export of Kenya’s rst crude from the Lokichar elds in the remote north-west.
Total became a minority shareholder in the upstream scheme in 2017 by dint of acquir- ing Denmark’s Maersk Oil, and in January last year pledged its commitment to the independ- ent pipeline. The conduit will run 892km to Lamu on the northern coast and carry an initial 60-80,000 bpd, at an estimated project cost of around $2.1bn. e UK’s Wood Group won the FEED contract in April last year.
Tullow’s latest trading statement reported that the FEED studies for both the upstream and midstream projects were being nalised, and that the twin ESIAs were on track for submis- sion to the National Environment Management Agency by the end of the second quarter.
An FID is being targeted by year-end, “although this remains an ambitious target,” the UK rm said.™
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