SME News

Kenya and Uganda run fresh bid to build 350km fuel shipment line

Kenya and Uganda are on the search for a new investor for the construction of an oil pipeline between Eldoret and Kampala. This new fuel transport system is expected to ease shipment of oil across the borders.

The call for fresh bids comes after the termination of an agreement between Tamoil East Africa Limited and the governments of Kenya and Uganda for, what officials termed as failure by Tamoil to meet the terms of the contract.

Mr. Celest Kilinda, managing director of Kenya Pipeline said that the agreement with Tamoil was terminated as the company was not able to meet some conditions of the agreement.

The agreement was terminated early this year, after the governments of Rwanda and Uganda also took a similar decision quoting failure by the Libyan company to accomplish milestones agreed upon in the 2008 Memorandum of Understanding between the firm and the two East African countries.

Tamoil was under contract to extend the proposed Eldoret-Kampala pipeline to Kigali in 2008 after it was successful in the bid for the construction of the Kenya-Uganda pipeline in 2006.

Though it is not clear what terms of the agreement Tamoil did not fulfil, it has been indicated that the three East African governments wanted to distance themselves from the Libyan company, especially after the UN Security Council imposed an assets freeze on Libya. The free would also apply to assets within the territories of UN member countries due to the uprising that resulted in the death of the former Libyan leader Muammar Gaddafi.

The Kenya-Uganda pipeline deal involved Tamoil who had been contracted to set up a 350-kilometer pipeline that would be used to transport refined petroleum products and operate it for 20 years before transferring ownership to the two governments.

Mr. Kilinda said that in the fresh bids, the terms of construction and operation will not change as neither of the two governments will have equity participation in the project.

Not only would the pipeline be use to ship refined petroleum products between Mombasa and Kampala, but it would also be used by Kenya to import petroleum from Uganda if it should set up refineries to process crude oil from reserves.

Mr. Kilinda also said that after Uganda made oil discoveries, attempts were made to make the pipeline reverse the flow to assist in the oil import from Uganda if it refines substantial amounts for exports.

UK’s Tullow Oil Plc discovered oil at Uganda in 2006, and after a number of tests, it was seen that the oil deposits in the country were found to be in excess of three million barrels, and the amount was fit for commercial exploitation.

Apart from the Eldoret-Kampala oil pipeline deal, Kenya has also entered into a Memorandum of Understanding with the republic of South Sudan for the construction of an oil pipeline between the proposed port of Lamu and the oil fields of Juba.

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