• EACOP costs rise to $5.6 billion, 55% above estimates
• Uganda oil revenues could fall up to 53%, IEEFA says
• Tanzania, Uganda target first crude shipment by July

Cost overruns on the East African Crude Oil Pipeline (EACOP) project are weighing on Uganda’s oil revenue projections. In its report Reassessing Oil in Uganda, published last December, the Institute for Energy Economics and Financial Analysis (IEEFA) said the pipeline’s cost is now estimated at $5.6 billion, roughly 55% higher than earlier estimates made before the final investment decision.

The IEEFA modeled several oil price and global demand scenarios. In those scenarios, the Ugandan government’s revenues could be as much as 53% lower than initial projections made before the cost revision. The report said this estimate reflects the combined effect of cost overruns, delays and its market assumptions.

Financial returns for oil companies are projected to fall between 25% and 34% compared with initial forecasts. The IEEFA noted that oil contracts allow companies to recover capital costs first before profits are shared. Higher spending therefore increases the amount to be recovered before the government receives its share of profits.

Tanzania and Uganda aim for first oil shipment by July

Tanzania and Uganda have set July as the target for the start of operations on the East African Crude Oil Pipeline. According to official statements reported on Feb. 10 by Agence Ecofin, the two countries aim to load the first crude shipment by July this year. The deadline was announced following discussions between Tanzanian President Samia Suluhu Hassan and Ugandan President Yoweri Museveni.

Construction of the 1,443-kilometer pipeline, which runs from oil fields in western Uganda to the port of Tanga in Tanzania, is approximately 79% complete. The schedule marks the final stage of infrastructure works supporting the development of the Tilenga and Kingfisher fields, ahead of the first commercial shipment.

Abdel-Latif Boureima