The deal to construct a pipeline to Tanzania's Tanga port has raised Uganda's hopes of commencing the production of crude oil by 2018, a government official revealed.

The spokesman for the Energy Ministry, Bukenya Matovu, has said that the agreement was to construct a pipeline through Tanzania was arrived at during the weekend after months of uncertainty as to which route to direct the pipeline.

“Production in Uganda starts by probably 2018, but even that would be optimistic,” Matovu stated.

He cited the government’s rewarding of families that will relinquish their land to production facilities, and the unavailability of a lot of the infrastructures which includes holding facilities and pumping stations as some of the challenges remaining.

Meanwhile, the government has said that the price of transporting its crude oil via a pipeline through Tanzania will be capped at $12.20 a barrel even though the two countries are yet to decide on a final tariff for the project.

According to Uganda's Energy and Mineral Development Minister, Irene Muloni (photo), key considerations had gone into Uganda's decision to pick Tanzania for the route and the pipeline is expected to be completed by 2020.

“A project cost of $3.55 billion and a (transit) tariff of not more than $12.2 per barrel ... those were the considerations and it's most likely to be a PPP (public private partnership) arrangement,” Muloni said.

Total, which has investments in Uganda, had favored the Tanzanian route, saying that the pipeline decision is a major milestone towards the development and production of Ugandan resources. The company has said it is prepared to finance the project but did not disclose if it wants to be the owner of the pipeline or a partner.

Uganda has been estimated to have oil reserves of over six billion barrels in the Lake Albert basin. The government has revealed plans to construct a refinery with a capacity to produce 60,000 bpd, while its partners will construct the oil pipeline.

In 2014, the government entered into a deal with Total, Tullow, and China National Offshore Oil Corporation (CNOOC). Under the deal, some percentage of the crude to be produced will be used to generate power locally, while the remaining will be for domestic consumption or exported, the Gleaner news reports.

Anita Fatunji