Uganda moves closer to pipeline dream after China promises financing; What is in it for local logistics companies?

By Moses Muhairwe

Last week government announced that Chinese lenders will provide 50% of the US$3 billion debt that Uganda requires to build the East Africa Crude Oil pipeline EACOP. According to the Ministry of Energy and Mineral Development, talks are in the final stages with China Export & Credit Insurance Corporation Sinosure and the Export-Import Bank of China- Eximbank to finance the construction of the EACOP after some Western lenders backed out due to environmental concerns.

These developments mark yet another significant milestone and will soon pave the way for the construction of the EACOP which will see a flurry of activity for logistics firms in Uganda eager to take advantage of the opportunities presented by this project.

Logistics firms need to prepare by registering on the national supplier database, investing heavily in strong information technology systems to monitor goods in transit as well as building capacity and strategic partnerships. While the main logistics contractor services will be undertaken by an association of Bolloré Logistics entities in Europe, Uganda and Tanzania, these operations are meant to maximise opportunities for local Ugandan companies as well through subcontracting, employment and ensuring meaningful local content and participation.

It is important to note that, the main logistics contract scope includes end-to-end receiving, storage, handling, and transportation of hundreds of thousands of cubic meters of cargo, including over 80,000 joints of 18-meter line-pipe, numerous heavy-lift operations from global origin locations to the main project discharge points in Tanzania and Uganda, as well as the provision of specially designed 18-meter trailers to deliver the line-pipe to numerous locations.

Micro-small and medium enterprises MSMEs from the 10 EACOP districts recently signed an MOU with large and medium contractors that will be working on the EACOP aimed at boosting business linkages and partnerships. This is under a project implemented by the Petroleum Authority PAU supported by the African Development Bank. The AfDB and government signed a US$500,000 grant agreement to finance the capacity building of MSMEs to boost business linkages along the EACOP.

EACOP remains a key project in Uganda’s midstream section of the petroleum value chain. The 1,440-kilometre, 216,000-bopd capacity pipeline will export crude oil from Kabaale in western Uganda to the port of Tanga in Tanzania, where ocean-going tankers will export the crude oil worldwide. According to PAU, EACOP Ltd was granted a licence to construct the pipeline in January. Early civil works, which consist of vegetation clearing and land grading are underway on the EACOP main camps and pipe yards. Land acquisition for EACOP, resettlement and compensation processes are currently at 80% completion with PAU monitoring these activities to ensure that the processes are fair and transparent.

The drilling of production wells for the Kingfisher and Tilenga oil production projects has also been ongoing since January 2023.PAU says that the drilling of the first well for the Kingfisher field has been completed to a total depth of about 3000 meters, and the LR8001 rig is now at the location of the second well.  For the Tilenga project, three rigs have been designated for the drilling operations. The rigs have noise-suppressing technology and are fully automated and environmentally friendly.

Uganda’s plan to construct a crude oil pipeline in the net zero era remains an uphill task due to ongoing protests from environmentalists against the pipeline and the pressing environmental issues that demand attention. These have resulted in the withdrawal of some Western investors and funders that are keen on environmental and social governance principles thus delays in construction plans.

Written by Moses Muhairwe the Managing Director, Vision Logistics (U) LTD, mmuhairwe@visionlogisticslimited.com,