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Can This Pipeline Unlock East-African Oil Potential?

Can This Pipeline Unlock East-African Oil Potential?

Critical decision over the weekend on one of the world’s most-watched infrastructure developments — in the fast-emerging oil and gas basins of Eastern Africa.

That came from a meeting of the so-called East African Community bloc on Saturday. Where countries including Uganda, Kenya, Tanzania, Rwanda and Burundi got together — with one of the biggest items for discussion being the route for a massive new oil pipeline in this part of the world.

Here’s why this a big deal.

The last several years have seen a lot of oil discovered in both Kenya and Uganda. Onshore Kenya finds by explorers like Africa Oil and Tullow Oil have already reached into the hundreds of millions of barrels. And players like China’s CNOOC are actively developing Uganda’s reserves. Related: The Real Reason Saudi Arabia Killed Doha

None of these mega-plays are selling oil however. Because of a lack of pipelines to move the crude from inland basins to the coast for export.

East Africa’s oil nations have been discussing how best to build such a pipeline. With two major schemes emerging: a Uganda-Tanzania route, and a competing Uganda-Kenya route. The map below shows how the different routes shape up.

Source: qz.com

And here’s the big decision: the East African Community bloc decided this weekend to go with the Tanzania oil pipeline route. Related: Horizontal Land Rig Count Summary 22nd April 2016

One of the biggest drivers in the decision was reportedly France’s Total. Which is a co-developer of Uganda’s oil fields — and which had been concerned about security along the Kenyan export route, especially in areas where the pipe would have passed close to Somalia.

It appears that Total will now get the route they want. With Kenya’s oil developers getting the shorter end of the stick — being left on their own to foot the bill for a stand-alone export pipeline.

All indications were that such a Kenya-only pipeline will now proceed, meaning that Kenya’s developers will at least have a clearer timeline on first production for their fields. The key now will be financing — watch for news here on how groups like Tullow and Africa Oil will pay for this all-important piece of infrastructure.

Here’s to keeping it moving

By Dave Forest

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