Page 8 - DMEA Week 15 2021

DMEA COMMENTARY DMEA

EACOP ready to launch

Uganda, Tanzania, Total and CNOOC are very close to clearing all the paperwork
needed to start construction work on the 1,445-km Hoima-Tanga oil pipeline

AFRICA AFTER more than a decade of waiting, Uganda and project closure.
has come very close to passing another milestone In any event, Uganda’s HGA is now signed.
on the way to monetising its crude oil reserves. And assuming that Tanzania’s HGA can be final-
WHAT: It has a concrete plan in place for moving future ised as quickly as anticipated, there will soon be
EACOP’s shareholders production to market, and it has nearly wrapped no more barriers to starting work on the pipeline
have finalised all but one up the task of establishing the legal foundation itself, and the parties will be able to take a final
of the agreements needed for its plan. investment decision (FID) on the project.
to launch construction. The milestone in question is the signing of The only thing left to do, said the officials
three more documents on the East Africa Crude quoted by The Monitor, is “to tie a few loose
WHY: Oil Pipeline (EACOP) in Entebbe on April 11. ends.”
The signing of documents One of those documents was a tariff and This will include tasks such as the Ugandan
of April 11 has allowed transportation agreement (TTA) between government’s re-evaluation of engineering, pro-
Total to set 2025 as the EACOP’s shareholders and the companies that curement and construction (EPC) contracts
target date for bringing will use the pipeline to transport their oil to mar- awarded by Total and CNOOC, since these two
Uganda’s oilfields on ket, and another was a shareholders agreement companies are entitled to recover their expenses
stream. (SA) that detailed the shareholder structure of after the sale of future crude production.
EACOP and the obligations of each shareholder.
WHAT NEXT: Both of these documents were signed by the Opportunities for contractors
The upstream and heads of EACOP’s four shareholders: France’s As such, some observers in Uganda and Tanza-
midstream projects are Total, China National Offshore Oil Corp. nia are optimistic about the possibility that the
slated to create many (CNOOC), Uganda National Oil Co. (UNOC) EACOP holding company might be able to wrap
new jobs and boost and Tanzania Petroleum Development Corp. up the process of evaluating bids from potential
foreign investment (TPDC). contractors within the next month.
in both Uganda and The third document, meanwhile, was Ugan- If so, the consortium could start construction
Tanzania. da’s host government agreement (HGA) with the work as early as July. As of press time, Total, the
EACOP holding company for the project. leader of EACOP, had not said exactly when it
Tanzania had also been slated to finalise its expected to start building the pipeline.
own HGA with EACOP on the same day, but it Meanwhile, Ugandan and Tanzanian com-
postponed the signing until next week. Accord- panies are eagerly awaiting the project, which
ing to the Ugandan press, this move was related is anticipated to carry a price tag or $3.55bn
to last-minute revisions of the document, and no or more. A significant chunk of that sum will
more delays are expected. be spent in Tanzania, since 80% of the 1,445-
km pipeline will pass through that country’s
Obstacles overcome territory.
These signings are notable partly because the Ugandan service providers also stand to ben-
documents involved represent the last adminis- efit, as that country’s government has declared
trative obstacle to starting work on the 216,000 that only local companies will be allowed to
barrel per day (bpd) pipeline, which will follow bid for contracts in 25 specific fields, including
a 1,445-km route from Hoima, a town near Lake camp management, civil works, hotel accommo-
Albert in western Uganda, to Tanga, a port on dations and catering, human resource manage-
Tanzania’s Indian Ocean coast. ment, labour provision, security, surveying and
But they are also important because they rep- transportation and logistics.
resent the overcoming of certain difficulties. The There is also the Hoima refinery to consider,
parties have been negotiating the HGAs since which will receive 16,000 bpd from the Lake
2017, and these talks have been “more burden- Albert fields and is expected to be completed in
some” than any other discussions concerning 2024. A 60,000-bpd facility has been discussed
EACOP, according to Tanzanian and Ugandan with construction costs estimated at $3.5bn, but
officials quoted by The Monitor, a Ugandan considering the availability of feedstock, a mod-
newspaper. ular alternative may be a more effective option.
These difficulties are hardly surprising, in that These service contracts have the potential to
the HGAs cover quite a bit of ground. They spell create more than 100,000 new jobs in Uganda
out the obligations of each host country’s gov- and Tanzania, both directly and indirectly.
ernment, while also stipulating environmental Many of these jobs will not be permanent;
and other standards, investors’ duties, liability instead, they may last for two or three years,

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