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THE KENYA – UGANDA OIL PIPELINE PROJECT by Ben Twodo MINISTRY OF ENERGY AND MINERAL DEVELOPMENT, UGANDA NOT AN OFFICIAL UNCTAD RECORD.

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Presentation on theme: "THE KENYA – UGANDA OIL PIPELINE PROJECT by Ben Twodo MINISTRY OF ENERGY AND MINERAL DEVELOPMENT, UGANDA NOT AN OFFICIAL UNCTAD RECORD."— Presentation transcript:

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2 THE KENYA – UGANDA OIL PIPELINE PROJECT by Ben Twodo MINISTRY OF ENERGY AND MINERAL DEVELOPMENT, UGANDA NOT AN OFFICIAL UNCTAD RECORD

3 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project 2 STRUCTURE 1. Project Inception 2. First Feasibility Study 3. Complementary Study 4. Highlights of the Report 5. Ownership and Management 6. Implementation 7. Conclusion

4 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project 3 INCEPTION OF THE PROJECT  A Memorandum of Understanding (MOU) between Kenya and Uganda signed in May 1995  A Joint Coordination Commission (JCC) established

5 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project 4 INCEPTION cont’d …  The TOR of the JCC initially to coordinate the feasibility study for the pipeline extension.  TOR expanded in Oct 2000 to include implementation of the entire project.

6 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project 5 INCEPTION cont’d …  Agreed from start that the project be promoted and developed as a regional project.

7 THE FIRST FEASIBILITY STUDY  The European Investment Bank (EIB) financed the first feasibility study.

8 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project 7 FIRST STUDY cont’d …  An international consultancy firm contracted to undertake a feasibility study in  The consultant conducted the study in 1998 and presented its report in May 1999.

9 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project 8 FIRST STUDY cont’d …  The study concluded that the project is feasible and viable.

10 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project 9 THE SECOND/COMPLENTARY STUDY  In 2001, a complementary study was commissioned to: o update the first study and reconfirm the pipeline as the least cost mode o prepare documentation to invite bids from private sector investors

11 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project10 COMPLEMENTARY STUDY cont’d …  Study financed by the two Governments under the auspices of the JCC.  Study carried out by another international firm.

12 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project11 COMPLEMENTARY STUDY cont’d …  Report on Stage 1 of the study submitted in Nov 2001.

13 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project12 HIGHLIGHTS OF THE REPORT  Market demand o Present demand is about 580,000 m 3 p.a. o Demand grows at 3.5% – 5% p.a

14 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project13 HIGHLIGHTS cont’d …  Pipeline route o Pipeline to be extended from Eldoret in Kenya, through Malaba on the border (110 km), through Jinja (130 km from Malaba) then to Kampala (80 km)

15 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project14 HIGHLIGHTS cont’d … o Kisumu – Malaba is second option o Total pipeline length approximately 320 km

16 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project15 HIGHLIGHTS cont’d …  Pipeline size o An 8 inch diameter pipeline recommended

17 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project16 HIGHLIGHTS cont’d …  Flow rate and capacity o Pumping flow rate of 168 m 3 per hour o Annual capacity is 1,200,000 m 3

18 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project17 HIGHLIGHTS cont’d …  No engineering design at this stage.

19 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project18 KAMPALA TERMINAL  A common user terminal to be located in Kampala  Terminal to be located east of the city

20 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project19 KAMPALA TERMINAL  Ministry prefers location west of the city to lessen truck traffic through city

21 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project20 KAMPALA TERMINAL cont’d …  Kampala terminal capacity to be 72,000 m 3 comprising: o 7 products o 4 interface tanks

22 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project21 KAMPALA TERMINAL cont’d …  Tanks Configuration o MPS- 2 tanks -32,500 m 3 o BIK- 2 tanks - 5,654 m 3 o JET- 2 tanks -10,544 m 3 o AGO- 2 tanks -22,570 m 3 o Interface - 4 tanks 904 m 3

23 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project22 CAPITAL COST ESTIMATES  Cost estimates for basic development - $96.9 million

24 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project23 CAPITAL COSTS cont’d … o Design, engineering, supervision - $7.2 m o Preliminaries and general costs - $5.4 m o Pipe laying-$42.2 m o Eldoret terminal - $4.6 m

25 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project24 CAPITAL COSTS cont’d … o Sindendet pump station - $3.4 m o Intermediate pump station - $3.4 m o Kampala terminal cost - $30.7 m

26 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project25 CAPITAL COSTS cont’d …  Additional $12 million for: o Improvement of pumping capacity at Burnt Forest in Kenya – $5.1 m

27 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project26 CAPITAL COSTS cont’d … o T-off to government’s storage depot in Jinja; additional facilities - $2.1 m o Re-locating terminal west of Kampala - $4.7 m

28 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project27 ECONOMICS  Current truck transportation rates vary $40 - $42 per m 3

29 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project28 ECONOMICS  Viability of the project tested for various tariffs and investment configurations.  The IRR in all cases showed the project to be viable; 18% - 25%

30 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project29 GOVERNMENTS POSITION  The complementary study report was accepted by JCC in 2001  The Governments accepted JCC recommendation in 2003.

31 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project30 GOVERNMENTS POSITION cont’d …  Extension to be independent of existing Mombasa – Eldoret pipeline (owned and managed by GoK through the Kenya Pipeline Company).

32 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project31 GOVERNMENTS POSITION cont’d …  The two pipelines to be unified in future and operated as a single entity; Mombasa – Kampala.

33 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project32 OWNERSHIP AND MANAGEMENT  Ownership to be joint public- private partnership o Private investor51% o Governments49% (24.5% each)

34 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project33 OWNERSHIP AND MANAGEMENT  Private sector partner to be selected through open competitive bidding process  The project to be implemented on BOOT terms.

35 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project34 OWNERSHIP & MANAGEMENT cont’d …  Private sector to manage and operate the pipeline

36 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project35 OWNERSHIP/MANAGEMENT cont’d …  Governments’ shares to be offloaded to private investors in future

37 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project36 LEGAL FRAMEWORK  A legal framework be developed immediately by the two governments: o Bilateral/International agreements defining legal, commercial, financial arrangements.

38 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project37 LEGAL FRAMEWORK cont’d … o Host country laws on taxation, transportation, customs, etc. o Commercial agreements – government/company or inter company.

39 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project38 ENVIRONMENTAL IMPACT ASSESSMENT  Environment impact assessment study be carried out parallel to identification of private sector investor o TOR ready o Financing available

40 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project39 PROJECT FINANCING  Project financing to be used based on future stream of revenues.  Oil marketing companies willing to sign agreements with promoters.

41 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project40 WAY FORWARD  Prepare documentation to select private partner for the project  The selection will be through competitive process

42 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project41 IMPLEMENTATION TIMETABLE  Expression of Interests - -1½ months  Bidding - 3 months  Negotiations & contract - 1 month  Formation of JVC-1 month

43 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project42 IMPLEMENTATION TIMETABLE cont’d …  Legal framework-3 months  EIA-4 months These to run concurrent with investor selection

44 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project43 IMPLEMENTATION TIMETABLE cont’d …  Procure, Construction and Commissioning27 – 32 months

45 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project44 CONCLUSION  The Kenya – Uganda oil pipeline project is feasible and viable.  Ready market exists  Attractive rates of return assured.

46 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project45 CONCLUSION cont’d …  The project classified as high priority in both countries.

47 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project46 CONCLUSION cont’d …  The project to be implemented as a regional project in the spirit of East African Community (EAC), the New Partnership for Africa (NEPAD), etc

48 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project47 CONCLUSION cont’d …  Many financial institutions have indicated interest to support the project o World Bank Group, EIB, AfDB, PTA Bank, EADB, etc. o Bilateral sources and finance houses, etc.

49 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project48 CONCLUSION cont’d …  A number of investors have expressed interest in the project

50 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project49 COME, LETS DO BUSINESS TOGETHER THANK YOU!


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