TotalEnergies and its partner China National Offshore Oil Corporation have reached a deal with Uganda and Tanzania to invest more than $10 billion in constructing the world’s longest heated crude oil pipeline in East Africa.
The French energy major and its partners China National Offshore Oil Corporation (Cnooc) and the Uganda National Oil Company announced the final investment decision for the $10bn projects on Tuesday at a ceremony in the Ugandan capital Kampala.
“The development of Lake Albert resources is a major project for Uganda and Tanzania, and our ambition is to make it an exemplary project in terms of shared prosperity and sustainable development,” chief executive Patrick Pouyanné said in a statement released following the ceremony.
Oil was first discovered in Lake Albert on Uganda’s north-western border with the Democratic Republic of Congo in 2006.
Oil production from the Tilenga project operated by Total and the Kingfisher project operated by Cnooc is expected to start in 2025 and reach a combined 230,000 barrels a day. That would take Uganda past Gabon, which according to Opec was the seventh-largest oil producer in Africa last year at 186,000 b/d.
Total said the project was in line with the company’s strategy of only approving new projects that were “low-cost and low commissions”.
“This milestone puts us on the path to first oil in 2025,” Minister of Energy and Mineral Development Ruth Nankabirwa Ssentamu said in a speech ahead of the signing.
Close to 160,000 jobs are expected to be created during the project’s development, Ssentamu said.
However, the investment decision is likely to be loudly opposed by climate activists, who have criticized the environmental impact of the project and questioned the long-term economic benefits to Uganda given forecasts that global crude consumption could peak before 2030.
Like other European oil majors, Total has committed to cutting emissions but it has also shown it remains willing to fund new hydrocarbon investments. In September it announced an initial $10bn investment in a series of projects in Iraq to boost oil production, reduce gas flaring and increase renewable power generation.
Pouyanné said Total was “fully aware of the important social and environmental challenges” associated with the project.
“We will pay particular attention to use local skills, to develop them through training programmes, to boost the local industrial sector in order to maximize the positive local return of this project,” he said.
Similarly to the Iraq deal, which included a commitment to construct a 1 gigawatt solar power plant, Total said it had signed a memorandum of understanding with the Ugandan government to explore the installation of 1GW of renewable power capacity in the country.
Under that agreement TotalEnergies will develop solar, wind, geothermal and other renewable technology power projects with a combined installed electricity output capacity of 1 gigawatt by 2030. Uganda currently has generating capacity of about 1.2 GW.
The French energy major controls a 57 per cent stake in the upstream project and a 62 per cent stake in the pipeline. Other shareholders in the East African Crude Oil Pipeline company that will build and operate the pipeline include Cnooc, which has an 8 per cent stake, and the Ugandan and Tanzanian governments, which hold 15 per cent each.
The East African Crude Oil Pipeline (EACOP) is a 1,443km, 24-inch diameter heated and buried crude oil pipeline that will start from Kabaale, Hoima in Uganda to Chongoleani, Tanga in Tanzania. The pipeline will have a manifold in Kabaale, Hoima, six (06) pumping stations (two (02) of which will be located in Uganda), 27 heating stations and two (02) pressure reduction stations.
The Hoima (Uganda) – Tanga (Tanzania) route was selected as more secure, at a cheaper cost and therefore, a lower tariff.