the kenya – uganda oil pipeline project by ben twodo ministry of energy and mineral development,...
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THE KENYA – UGANDA OIL PIPELINE PROJECT
byBen Twodo
MINISTRY OF ENERGY AND MINERAL DEVELOPMENT, UGANDA
NOT AN OFFICIAL UNCTAD RECORD
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
STRUCTURE1. Project Inception2. First Feasibility Study3. Complementary Study4. Highlights of the Report5. Ownership and Management6. Implementation7. Conclusion
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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
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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.
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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.
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THE FIRST FEASIBILITY STUDY
The European Investment Bank (EIB) financed the first feasibility study.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 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.
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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.
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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:oupdate the first study and reconfirm the pipeline as the least cost mode
oprepare documentation to invite bids from private sector investors
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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COMPLEMENTARY STUDY cont’d …
Study financed by the two Governments under the auspices of the JCC.
Study carried out by another international firm.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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COMPLEMENTARY STUDY cont’d …
Report on Stage 1 of the study submitted in Nov 2001.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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HIGHLIGHTS OF THE REPORT
Market demandoPresent demand is about 580,000 m3 p.a.
oDemand grows at 3.5% – 5% p.a
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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HIGHLIGHTS cont’d …
Pipeline routeoPipeline 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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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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HIGHLIGHTS cont’d …
oKisumu – Malaba is second option
oTotal pipeline length approximately 320 km
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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HIGHLIGHTS cont’d …
Pipeline sizeoAn 8 inch diameter pipeline recommended
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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HIGHLIGHTS cont’d …
Flow rate and capacityoPumping flow rate of 168 m3 per hour
oAnnual capacity is 1,200,000 m3
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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HIGHLIGHTS cont’d …
No engineering design at this stage.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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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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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 1
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KAMPALA TERMINAL
Ministry prefers location west of the city to lessen truck traffic through city
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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KAMPALA TERMINAL cont’d …
Kampala terminal capacity to be 72,000 m3 comprising:
o7 productso4 interface tanks
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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KAMPALA TERMINAL cont’d …
Tanks Configuration o MPS - 2 tanks - 32,500 m3
o BIK - 2 tanks - 5,654 m3
o JET - 2 tanks - 10,544 m3
o AGO - 2 tanks - 22,570 m3
o Interface - 4 tanks 904 m3
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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CAPITAL COST ESTIMATES
Cost estimates for basic development - $96.9 million
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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CAPITAL COSTS cont’d …
oDesign, engineering, supervision - $7.2 m
oPreliminaries and general costs - $5.4 m
oPipe laying - $42.2 moEldoret terminal - $4.6 m
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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CAPITAL COSTS cont’d …
oSindendet pump station - $3.4 m
o Intermediate pump station - $3.4 m
oKampala terminal cost - $30.7 m
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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CAPITAL COSTS cont’d …Additional $12 million for:
o Improvement of pumping capacity at Burnt Forest in Kenya – $5.1 m
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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CAPITAL COSTS cont’d …oT-off to government’s storage depot in Jinja; additional facilities - $2.1 m
oRe-locating terminal west of Kampala - $4.7 m
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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ECONOMICS
Current truck transportation rates vary $40 - $42 per m3
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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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% - 25%
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 2
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GOVERNMENTS POSITION
The complementary study report was accepted by JCC in 2001
The Governments accepted JCC recommendation in 2003.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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GOVERNMENTS POSITION cont’d …
Extension to be independent of existing Mombasa – Eldoret pipeline (owned and managed by GoK through the Kenya Pipeline Company).
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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GOVERNMENTS POSITION cont’d …
The two pipelines to be unified in future and operated as a single entity; Mombasa – Kampala.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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OWNERSHIP AND MANAGEMENT
Ownership to be joint public-private partnership
oPrivate investor51%oGovernments 49%
(24.5% each)
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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OWNERSHIP AND MANAGEMENT
Private sector partner to be selected through open competitive bidding process
The project to be implemented on BOOT terms.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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OWNERSHIP & MANAGEMENT cont’d …
Private sector to manage and operate the pipeline
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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OWNERSHIP/MANAGEMENT cont’d …
Governments’ shares to be offloaded to private investors in future
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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LEGAL FRAMEWORK
A legal framework be developed immediately by the two governments:oBilateral/International agreements defining legal, commercial, financial arrangements.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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LEGAL FRAMEWORK cont’d …
oHost country laws on taxation, transportation, customs, etc.
oCommercial agreements – government/company or inter company.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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ENVIRONMENTAL IMPACT ASSESSMENT
Environment impact assessment study be carried out parallel to identification of private sector investoroTOR readyoFinancing available
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 3
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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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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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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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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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IMPLEMENTATION TIMETABLE
Expression of Interests - - 1½ months
Bidding - 3 monthsNegotiations & contract - 1
monthFormation of JVC - 1 month
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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IMPLEMENTATION TIMETABLE cont’d …
Legal framework - 3 months
EIA - 4 months
These to run concurrent with investor selection
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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IMPLEMENTATION TIMETABLE cont’d …
Procure, Construction and Commissioning 27 – 32 months
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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CONCLUSION
The Kenya – Uganda oil pipeline project is feasible and viable.
Ready market existsAttractive rates of return
assured.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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CONCLUSION cont’d …
The project classified as high priority in both countries.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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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
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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CONCLUSION cont’d …
Many financial institutions have indicated interest to support the projectoWorld Bank Group, EIB, AfDB, PTA Bank, EADB, etc.
oBilateral sources and finance houses, etc.
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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CONCLUSION cont’d …
A number of investors have expressed interest in the project
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Ministry of Energy and Mineral Development, UGANDA.Kenya – Uganda Oil Pipeline Project 4
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COME, LETS DO BUSINESS TOGETHER
THANK YOU!