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THE KENYA – UGANDA OIL PIPELINE PROJECT

THE KENYA – UGANDA OIL PIPELINE PROJECT. by Ben Twodo MINISTRY OF ENERGY AND MINERAL DEVELOPMENT, UGANDA. STRUCTURE. Project Inception First Feasibility Study Complementary Study Highlights of the Report Ownership and Management Implementation Conclusion. INCEPTION OF THE PROJECT.

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THE KENYA – UGANDA OIL PIPELINE PROJECT

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  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 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 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. 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. Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

  7. FIRST STUDY cont’d … • 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. 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. 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: • update the first study and reconfirm the pipeline as the least cost mode • prepare documentation to invite bids from private sector investors Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

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

  12. HIGHLIGHTS OF THE REPORT • Market demand • Present demand is about 580,000 m3 p.a. • Demand grows at 3.5% – 5% p.a Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  13. HIGHLIGHTS cont’d … • 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) Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  14. HIGHLIGHTS cont’d … • Total pipeline length approximately 320 km Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  15. HIGHLIGHTS cont’d … • Pipeline size • An 8 inch diameter pipeline recommended Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  16. HIGHLIGHTS cont’d … • Pipeline capacity • Pumping flow rate of 168 m3 per hour • Annual capacity is 1,200,000 m3 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

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

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

  20. KAMPALA TERMINAL cont’d … • Kampala terminal capacity to be 72,000 m3 comprising: • 7 products • 4 interface tanks Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  21. KAMPALA TERMINAL cont’d … • 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 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

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

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

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

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

  27. ECONOMICS • Current truck transportation rates vary $38 - $42 per m3 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  28. 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% Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  29. GOVERNMENTS POSITION • The complementary study report was accepted by JCC in 2001 • The JCC recommended to the two Governments to implement the project. Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

  31. GOVERNMENTS’ POSITION cont’d … • A legal framework be developed immediately by the two governments: • Bilateral/International agreements defining legal, commercial, financial arrangements. Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  32. GOVERNMENTS’ POSITION cont’d … • Host country laws on taxation, transportation, customs, etc. • Commercial agreements – government/company or inter company. Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  33. GOVERNMENTS’ POSITION cont’d … • Engineering design be undertaken parallel to identification of private sector investor • TOR for consultancy being drafted Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  34. GOVERNMENTS’ POSITION cont’d … • Environment impact assessment study be carried out parallel to identification of private sector investor • TOR being drafted Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  35. OWNERSHIP AND MANAGEMENT • Ownership to be public-private partnership on boo terms • Private investor 51% • Governments 49% (24.5% each) Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

  37. OWNERSHIP/MANAGEMENT cont’d … • 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. Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

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

  40. IMPLEMENTATION TIMETABLE • Prepare documentation for bidding - 2 months • Open invitation for bidding - 6 months • Evaluation, negotiations and contract signing - 6 months Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  41. IMPLEMENTATION TIMETABLE • Legal framework - 3 months • Engineering design - 4 months • EIA - 4 months These to run concurrent with investor selection Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  42. IMPLEMENTATION TIMETABLE • Procure, Construction and Commissioning 27 – 32 months Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

  44. CONCLUSION • The project classified as high priority in both countries. Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  45. 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 Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

  46. CONCLUSION cont’d … • 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. Ministry of Energy and Mineral Development, UGANDA. Kenya – Uganda Oil Pipeline Project

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

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

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