Uganda’s long-awaited pipeline through Kenya has hit another snag after Uganda’s government announced that it is still considering a pipeline through Tanzania to export oil if it proved cheaper than alternatives, an official said on Wednesday, reported Reuters.
Robert Kasande, director of downstream at the Ugandan energy ministry, told Reuters: “We’ve talked about the northern Lamu route. However, in order to ensure that we have least cost … we’re also looking at the one that terminates at Tanga in Tanzania.”
“We will take the one which is cheaper and if it is the one to Tanga, we will take the one to Tanga,” he said while speaking on the sidelines of an oil and gas conference in Kampala.
Uganda’s presidential spokesman and Kenyan energy officials could not be reached. The president’s of both countries had made an open commitment to the pipeline project in August.
It is not clear, however, if this decision was taken by the Ugandan side of its own accord, given that an investor in Uganda, France’s Total, raised doubts the Kenyan route on Tuesday, adding that it was looking at a possible Tanzanian option.
According to Bloomberg, citing a 2015 PricewaterhouseCoopers study on the African oil and gas industry, oil companies had assumed prices higher than $80 per barrel when modeling projects.
Another major investor in Uganda, Tullow Oil, has already been cutting costs in East Africa when crude first fell to $50 a barrel.
An economic expert Bloomberg consulted on the planned $3.8b Uganda-Kenya pipeline said these “big oil-based investments are not feasible”.
“The lower oil price has created a great deal more of uncertainty around future oil production, given that additional capital expenditure will be required to make oil production a reality,” added Razia Khan, head of Africa economic research at Standard Chartered Plc in London.