19 October 2015, News Wires – Trust between Kenya and Uganda, the two key members of the East African Community, appears to be in short supply.
Just two months after the presidents of both countries signed an agreement to build an oil export pipeline between Lake Albert and Lamu port, the governments of Uganda and Tanzania — with Total’s support — said they will investigate piping crude from the Albertine basin to Tanga, by-passing Kenya totally.
This move is clearly a strategy by President Yoweri Museveni in Kampala to ensure the government of Uhuru Kenyatta, his counterpart in Nairobi, thinks twice before imposing onerous tariffs on Ugandan oil producers wanting to move their oil to global markets across Kenyan territory.
The August communique settled on a northern Kenya route for the inter-country pipeline, starting in Lake Albert, where Total, China National Offshore Oil Corporation and Tullow Oil control 1.8 billion barrels of resources. This route would pass closer to Tullow’s 600 million barrels of recoverable resources in Kenya’s Lokichar basin than the alternative southern Kenyan route.
However, this northern alignment is closer to areas of Kenya considered a security risk due to insurgents from Somalia.
This — plus cost and commercial terms — is one of the reasons Total is keen to see its one-third share of the oil spoils from Uganda piped to Tanga on the Tanzanian coast.
Kenya has to be careful during tariff talks because if it loses Uganda as a foundation client for the proposed northern pipeline, Lokichar’s current resources on their own may be insufficient to justify an export line.
Further impetus for Kenya to temper any tariff demands emerged earlier this month when Ethiopia and Djibouti agreed to build an oil products pipeline from Damerjog on the Red Sea to Awash in Ethiopia.
Ethiopia is supposedly a key partner in Kenya’s flagship Lapsset (Lamu Port-Southern Sudan-Ethiopia Transport) corridor project.
Kenya must address Uganda’s concerns if its crude is to find a route to world markets or Nairobi will risk relying on oil rich but war-torn South Sudan to underpin an export pipeline.