A Concerned President Uhuru Kenyatta
One President Uhuru Kenyatta is known as a man generally generous with his smile. The 3rd Northern Corridor Infrastructure Summit held in Munyonyo, Kampala, however saw him appear in one very sombre state.
Kenya-Uganda’s Long Standing Relationship
Given that Uganda has undoubtedly been one of Kenya’s long-time ally, this project had to be one handled with extra caution. Eliminating Kenya from the equation had to be done meticulously and with much sobriety so as to avoid burning bridges. Many meetings have been held. More re-inspections done. Studies reassesses. The decision to go with Tanzania had to be a well advised decision. The report had to be thorough… and hopefully one that President Kenyatta would understand and accept with no hard feelings.
What the Advisory Team and Other Industry Players Had to Say on the Matter
Ugandan technocrats from the Petroleum Directorate in the Ministry of Energy maintained that the southern route to Tanga port on the Indian Ocean coastline was the “least cost option.” According to the report, the technocrats prepared, the Port of Lamu lost out on all grounds of comparisons.
Toyota Tsusho Corporation (TTC) had recommended Lamu in a feasibility report submitted to the two governments in 2014. TTC stating the advantage of the already existing economies of scale between Uganda and Kenya, and further to tap into the benefits of $25b LAPSETT infrastructure corridor, the ambitious infrastructure corridor conceived by Kenya, Ethiopia and South Sudan.
Total International Oil Company’s Interest in the Deal
Total SA, parent company of Uganda’s Total E&P, one of the 3 International Oil Companies (IOC) licensed to operate in Uganda opposed this route from day one not only citing security concerns but also on grounds that Lamu port borders the restive Somalia and that the rough terrain with slopes go above 25 degrees. Why Total has such a primary interest in the Tanzanian route is a matter is open to discussion. Maybe the Kenyan picture attracts one too many players in the Oil Industry. Of course funding this project means that the Total Company gets an attractive piece of the money cake in long run…
Total contracted the US-Houston (Texas)-based Gulf Interstate Engineering to undertake a feasibility study on the alternative, Tanga route, and which was found more viable and less challenging to get oil from Uganda to the international market.
Where Things Began Taking an About Turn for Kenya
Sources revealed that in August last year, Presidents Museveni and Kenyatta, signed the first MoU to actualise a pipeline from Hoima to Lamu but Kenya seemed to have complicated the matter by procrastinating on the already lost time in arguments over preconditions Uganda had set, such as, guaranteeing security, upfront financing, and tariffs not higher than offered by the alternative. Whilst this was a heads of state decision, the technocrats had already chosen Tanga over Lamu. While considering this as a very Lucrative deal, President Kenyatta still wanted to tread carefully so as not get a raw deal. This was worsened by Total choosing to fund the Tanzania route with a whopping $4billion. And just like that the Kenya saw the deal slip into Tanzania’s hands.
President Museveni met Tanzanian President John Magufuli sometime in March on the side lines of the 17th Ordinary East African Community (EAC) summit, and the two sealed the deal for the project. Two weeks later, President Magufuli met the Total SA vice president for East Africa Javier Rielo, and the two agreed the company will start construction of the 1,410km (876-mile) pipeline “ASAP”
Delay In The Completion of the Construction of the LAPSETT corridor
The fact that the construction of the Lamu port, part of the LAPSETT corridor, is still incomplete has not worked in favour for Kenya. Tanzania may be the least cost option but could Uganda have been a bit short-sighted in signing the deal with Tanzania? What economies of scale will Uganda be foregoing by choosing to ignore the construction of the LAPSETT corridor, which a definite economic plus in the long run… Will the affair with Tanzania (no pun intended) prove to be the better option? Only time will tell…
