COVER STORY: Pipeline politics

The oil companies wrote back to the Tanzania Finance and Energy Ministries asking for a letter showing the entire package and ministry of Energy replied listing the entire package except the starting time of the depreciation.

However, when the Tanzanians replied, they were withdrawing their prior letter. They did not give a reason. The Tanzanian officials’ position at this time was that the earlier positions were merely proposals.

The Ugandan team was stunned because the so-called proposals had been signed by the two countries’ ministers. Without this fiscal package, Tanzania ceased to that attractive.

Meanwhile, Magufuli was telling officials that no one would reverse the deal he had reached with President Museveni because their “friendship was built on blood”.

At this point, the stuck Ugandan companies convinced President Museveni to talk to Magufuli. Museveni flew to Dar es Salaam on Feb. 25 and officials said  the pipeline deal was high on agenda. But a month later, nothing had changed much. Desperate, the Ugandan team once again started sending feelers to Kenya.

Tanzania fears Kenya’s return

In mid-April, sources tell The Independent, Uganda informally reached out to decision makers at the highest level in Kenya. The idea was to see if Kenya would renew interest in the deal it appeared to have lost to Tanzania a year ago.

Officials from the China Communications Construction Company (CCCC) which is interested in constructing a pipeline through Kenya had also flown to Nairobi over a possible deal.

But Tanzania appears to have been tipped off of the impending return of Kenya to the deal. Suddenly, Tanzania officials who had for months refused to sign the deal, called the Ugandan team and the deal was inked on April 26.

“They had been dilly-dallying because they thought Uganda was stuck,” an official told The Independent.

Construction works on the project are now expected to commence early 2018 and last 36 months. With the deal signed now, the companies are down to work. The next phase is financing. The companies and government are already in discussions over the Special Purpose Vehicle, currently called Pipe Co, which will construct, own and operate the pipeline.

This entity will also negotiate the shareholding and financing agreements, among others. Other agreements could include the Transportation Agreement between the company and shippers of oil from Tanga port to the international market.

It is this entity which will repay the cost of the pipeline infrastructure. Uganda has not budgeted for any pipeline works in the next Financial Year that starts in June and the Permanent Secretary in Uganda’s Ministry of Energy Stephen Isabalija told The Independent that the government expects the companies to lead the financing effort – at least until the government is able to find money to invest.

For now, all eyes are on Total SA, which promised to secure the financing during negotiations. But, as in the past, all players anticipate another round of pushing and purring over the financing decisions.

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