The Presidents of Uganda and Tanzania signed an agreement on the construction of an oil pipeline, which will ensure the delivery of crude oil from Uganda to the coast of the Indian Ocean. Deputy Director of the National Energy Institute Alexander Sergeevich Frolov told the correspondent Federal News Agency, will this oil become a competitor of Russian black gold in the world market.
Ugandan leader Yoweri Museveni and Tanzanian leader John Magufuli meet in Chato, Tanzania, to coordinate plans for the construction of an oil pipeline, which in the future will bring the two countries millions of dollars in profits from the sale of oil, and will also ensure the creation of more than ten thousand jobs.
East African oil pipeline (East African Crude Oil Pipeline, EACOP) will stretch for almost one and a half thousand kilometers from the oil fields near the city of Hoima in western Uganda to the Tanzanian port of Tanga.
An alternative pipeline through Kenya was previously planned: Khoima-Lokichar-Lamu route, which also captured Kenyan deposits in the area of Lake Turkana. But the route through Tanzania turned out to be more promising due to the fact, that the Kenyan oil port at Lamu has not yet been built, while Tanzania already has the necessary infrastructure.
The parties agreed on the distribution of profits from the future oil pipeline in the ratio 60/40, and 60% will receive Tanzania, as it will take place on its territory 80% pipeline.
Construction is scheduled to start at the end 2020 of the year, and the first deliveries are scheduled for 2023 year. A preliminary agreement on financing the project was signed with the French corporation Total. The cost of the project will be 3,5 billion US dollars.
Alexander Frolov, in an exclusive commentary for the Federal News Agency, noted, that such initiatives can only be welcomed. The oil industry is underfunded, allocated for the development of new deposits, that in the next five years may result in a shortage of oil on the world market.
Oil export is one of the most important budget items for Russia, and the entry of a new supplier into the market may seem like a threat to domestic supply. However, Frolov ruled out the possibility of serious competition between Ugandan oil and Russian oil..
Oil demand expected to recover next year. Respectively, these volumes, hardly significant, find a buyer, when production at existing fields is planned to be reduced. But I wouldn’t expect any significant competition with Russian supplies.”.
At the same time, the Expert notes, that to some extent Uganda was lucky, after all, deposits of the so-called “heavy” oil with a high content of tar and sulfur have been discovered in the country. In the world market, the supply of this type of oil is less, than "easy", characterized by a high content of gasoline fractions. Therefore, it is easier to find a buyer for such a product..
true, this will require the construction of a heated oil pipeline, because in its normal state, heavy oil is too viscous. Therefore, for pumping through pipes, it is heated to an average of 40–50 degrees..
“Now the demand for such oil is at a fairly high level.. Over the past year and a half, there has been an overabundance of light and ultra-light oil in the world, which caused an increased demand for heavy, viscous varieties", Frolov explained..
The thing is, that most refineries are not designed to handle light oil, and has to be blended with heavier grades for optimum performance, not many on the market. However, due to a decline in US production, oversupply of light oil on the market will decrease. However, against the backdrop of global underfunding of the industry, there will be a buyer for Ugandan-Tanzanian goods anyway..
“This oil can be delivered to buyers both in Europe, so in Asia. Tanzania is well placed for this.. Can some be sent to Europe?, and some to Asia. for example, to India or China. The Chinese are always happy with additional volumes of oil.”, - says Frolov.
In favor of that, that the main buyer of Ugandan black gold will be China, says the participation in the development of deposits on Lake Albert of the Chinese company CNOOC (China National Offshore Oil Corporation). In addition to it, the French Total and the British Tullow Oil are participating in the project..
It is impossible not to mention, that in connection with the construction of the oil pipeline, resettlement of about 12 000 families in Uganda and Tanzania. However, the authorities of the countries participating in the project and representatives of interested oil companies assure, that all displaced persons will be paid the due compensation.
Author: Grigory Nikolaev
