THE KENYA UGANDA OIL PIPELINE PROJECT

1
THE KENYA UGANDA OIL PIPELINE PROJECT

• by
• Ben Twodo
• MINISTRY OF ENERGY AND MINERAL DEVELOPMENT, UGANDA

2
STRUCTURE

• Project Inception
• First Feasibility Study
• Complementary Study
• Highlights of the Report
• Ownership and Management
• Implementation
• Conclusion

3
INCEPTION OF THE PROJECT

• A Memorandum of Understanding (MOU) between Kenya
  and Uganda signed in May 1995
• A Joint Coordination Commission (JCC) established

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INCEPTION contd

• 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.

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INCEPTION contd

• Agreed from start that the project be promoted
  and developed as a regional project.

6
THE FIRST FEASIBILITY STUDY

• The European Investment Bank (EIB) financed the
  first feasibility study.

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FIRST STUDY contd

• An international consultancy firm contracted to
  undertake a feasibility study in 1997.
• The consultant conducted the study in 1998 and
  presented its report in May 1999.

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FIRST STUDY contd

• The study concluded that the project is feasible
  and viable.

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THE SECOND/COMPLENTARY STUDY

• In 2001, a complementary study was commissioned
  to
• update the first study and reconfirm the pipeline
  as the least cost mode
• prepare documentation to invite bids from private
  sector investors

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COMPLEMENTARY STUDY contd

• Study financed by the two Governments under the
  auspices of the JCC.
• Study carried out by another international firm.

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COMPLEMENTARY STUDY contd

• Report on Stage 1of the study submitted in Nov
  2001.

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HIGHLIGHTS OF THE REPORT

• Market demand
• Present demand is about 580,000 m3 p.a.
• Demand grows at 3.5 5 p.a

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HIGHLIGHTS contd

• Pipeline route
• 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)

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HIGHLIGHTS contd

• Total pipeline length approximately 320 km

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HIGHLIGHTS contd

• Pipeline size
• An 8 inch diameter pipeline recommended

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HIGHLIGHTS contd

• Pipeline capacity
• Pumping flow rate of 168 m3 per hour
• Annual capacity is 1,200,000 m3

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HIGHLIGHTS contd

• No engineering design at this stage.

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KAMPALA TERMINAL

• A common user terminal to be located in Kampala
• Terminal to be located east of the city

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KAMPALA TERMINAL

• Ministry prefers location west of the city to
  lessen truck traffic through city

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KAMPALA TERMINAL contd

• Kampala terminal capacity to be 72,000 m3
  comprising
• 7 products
• 4 interface tanks

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KAMPALA TERMINAL contd

• Tanks Configuration
• MPS - 2 tanks - 32,500 m3
• BIK - 2 tanks - 5,654 m3
• JET - 2 tanks - 10,544 m3
• AGO - 2 tanks - 22,570 m3
• Interface - 4 tanks 904 m3

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CAPITAL COST ESTIMATES

• Cost estimates for basic development - 96.9
  million

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CAPITAL COSTS contd

• Design, engineering, supervision - 7.2 m
• Preliminaries and general costs - 5.4 m
• Pipe laying - 42.2 m
• Eldoret terminal - 4.6 m

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CAPITAL COSTS contd

• Sindendet pump station - 3.4 m
• Intermediate pump station - 3.4 m
• Kampala terminal cost - 30.7 m

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CAPITAL COSTS contd

• Additional 12 million for
• Improvement of pumping capacity at Burnt Forest
  in Kenya 5.1 m

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CAPITAL COSTS contd

• T-off to governments storage depot in Jinja
  additional facilities - 2.1 m
• Re-locating terminal west of Kampala - 4.7 m

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ECONOMICS

• Current truck transportation rates vary 38 - 42
  per m3

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ECONOMICS

• Viability of the project tested for various
  tariffs and investment configurations.
• The IRR in all cases showed the project to be
  viable 18 - 22

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GOVERNMENTS POSITION

• The complementary study report was accepted by
  JCC in 2001
• The JCC recommended to the two Governments to
  implement the project.

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GOVERNMENTS POSITION contd

• Extension to be independent of existing Mombasa
  Eldoret pipeline (owned and managed by GoK
  through the Kenya Pipeline Company).

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GOVERNMENTS POSITION contd

• A legal framework be developed immediately by the
  two governments
• Bilateral/International agreements defining
  legal, commercial, financial arrangements.

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GOVERNMENTS POSITION contd

• Host country laws on taxation, transportation,
  customs, etc.
• Commercial agreements government/company or
  inter company.

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GOVERNMENTS POSITION contd

• Engineering design be undertaken parallel to
  identification of private sector investor
• TOR for consultancy being drafted

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GOVERNMENTS POSITION contd

• Environment impact assessment study be carried
  out parallel to identification of private sector
  investor
• TOR being drafted

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OWNERSHIP AND MANAGEMENT

• Ownership to be public-private partnership on boo
  terms
• Private investor 51
• Governments 49 (24.5 each)

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OWNERSHIP MANAGEMENT contd

• Private sector to manage and operate the pipeline

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OWNERSHIP/MANAGEMENT contd

• Governments shares to be offloaded to private
  investors in future
• The two pipelines to be unified in future and
  operated as a single entity Msa Kla.

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PROJECT FINANCING

• Project financing to be used based on future
  stream of revenues.
• Oil marketing companies willing to sign
  agreements with promoters.

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WAY FORWARD

• Prepare documentation to select private partner
  for the project
• The selection will be through competitive process

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IMPLEMENTATION TIMETABLE

• Prepare documentation for bidding - 2 months
• Open invitation for bidding - 6 months
• Evaluation, negotiations and contract signing - 6
  months

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IMPLEMENTATION TIMETABLE

• Legal framework - 3 months
• Engineering design - 4 months
• EIA - 4 months
• These to run concurrent with investor selection

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IMPLEMENTATION TIMETABLE

• Procure, Construction and Commissioning 27 32
  months

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CONCLUSION

• The Kenya Uganda oil pipeline project is
  feasible and viable.
• Ready market exists
• Attractive rates of return assured.

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CONCLUSION

• The project classified as high priority in both
  countries.

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CONCLUSION contd

• The project to be implemented as a regional
  project in the spirit of East African Community
  (EAC), the New Partnership for Africa (NEPAD), etc

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CONCLUSION contd

• Many financial institutions have indicated
  interest to support the project
• World Bank Group, EIB, AfDB, PTA Bank, EADB, etc.
• Bilateral sources and finance houses, etc.

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CONCLUSION contd

• A number of investors have expressed interest in
  the project

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• COME, LETS DO BUSINESS TOGETHER
• THANK YOU!