Kenya and Uganda are in talks over a separate crude pipeline to facilitate Uganda’s oil export to Kenya’s coastline, as transport cost is expected to increase over preliminary negotiated Uganda-Tanzania route. The return on investment for the construction of the pipeline from South Lokichar in northwestern Kenya to the Lamu port on the Kenyan coast is expected to drop to 10%, down from previously recorded 13%, The East African reported, citing a recent report issued by KPMG.
Initially, the northern direction from Uganda’ Hoima through Lokichar to Lamu would have had a lower pipeline tariff of $7.70 per barrel and $8.30 per barrel for Kenya and Uganda, respectively.
However, according to preliminary calculations, with the planned two pipelines, Uganda-Kenya and Uganda-Tanzania, the cost of transporting crude is expected to rise by 68% to $12.94 per barrel for Kenya and 36% to $11.30 per barrel for Uganda.
In light of the negotiations between Uganda and Tanzania, according to which Uganda is to transport its crude from Hoima through the southern route in Tanzania to its Tanga sea port, Kenya has declared that it would decrease the price for the construction of 855 km in order to secure the deal. The total cost would thus amount to $2.1b.
In comparison, the pondered 1,443 km southern pipeline from Hoima to Mutukula in Uganda and to Bukoba in Tanzania, is expected to cost about $3.5b.
Meanwhile, Tanzania was reported to have concluded a deal with Uganda to complete the construction of the intended crude oil pipeline in 2020 at a valued cost of $3.5b.