The agreement was reached during Kenyan President Uhuru Kenyatta’s recent state visit to Uganda, where he signed several bilateral agreements with President Yoweri Museveni.
A joint presidential statement was issued following the visit, which stated: “The two heads of state agreed on the use of the northern route, that is Hoima – Lokichar – Lamu for the development of the crude oil pipeline.”
The statement said the implementation of the pipeline route would be subject to Kenya guaranteeing the security on its side of the pipeline, the financing of the project, and a transit fee not higher than would be payable on any other alternative route.
Two possible routes had been proposed, with the second one following the route of an existing products pipeline further south running to the port of Mombasa.
On the refined products pipeline from Mombasa via Eldoret to Kampala, Kenyatta and Museveni agreed to develop a reverse flow petroleum product pipeline capable of transporting imported petroleum products to Uganda and also from the refinery in Uganda to Kenya.
Petroleum resources
Both heads of state noted that oil in Uganda was discovered nine years ago and therefore development of a crude oil export pipeline needed to be implemented expeditiously to avoid any further delay in commercialising the petroleum resources.
Uganda is estimated to have over 6 billion barrels of crude oil in reserves, while Kenya estimates its recoverable reserves at approximately 1 billion barrels.
Pipeline investment
The route decision is an important step for oil firms to make a final investment decision, as oil executives have previously said they cannot make progress with their final investment decision on developing discoveries in Uganda and Kenya until the pipeline route and related costs were clear.
Joseph Njoroge, Kenya’s petroleum and energy ministry, said in June that once a decision on the route was made, the pipeline’s construction could be completed by about 2018 or 2019.
A spokesman for Britain’s Tullow Oil, with stakes in Uganda and Kenya, said in June Tullow expected to decide on whether to proceed with investment in late 2016.
France’s Total and China’s CNOOC are also investing in Uganda, while Tullow’s partner in Kenya is Africa Oil.
President and CEO of Africa Oil Keith Hill said “We are very pleased that the governments of Kenya and Uganda have agreed on the routing of the export pipeline and look forward to working with all stakeholders to move the joint oil development project forward.”
“We continue to be encouraged by the appraisal drilling and extended well testing program which has confirmed our original opinion that this is an outstanding project. We believe that there is still significant upside in not only the Lokichar Basin but in new basins yet to be opened and are working with our partner Tullow on a program to unlock this potential.”