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Uganda leading pipeline race

The country's oil-export pipeline will make progress. Tanzania's LNG plans probably won’t

Construction of a $3.55bn pipeline to take up to 200,000 barrels a day of oil 1,445km from the Albertine Basin of landlocked Uganda to the Tanzanian coast will be in full tilt in 2018. Oil should flow by 2020—at last giving an outlet to 1.7bn of recoverable reserves, the first of which were found more than a decade ago. Total, Cnooc and Tullow Oil are the main players in Uganda. Others may drill soon following a drawn-out licensing round for acreage relinquished by those three. Australia's Armour Energy was the first to sign a new exploration deal in 2017.

Neighbouring Kenya lost out to Tanzania in a battle to play host to and share the Ugandan oil pipeline and must now go its own way. Expect lobbying and maybe even a decision on that in 2018. It could involve building a pipeline from oil reserves discovered by Tullow and others close to Lake Turkana in northern Kenya either to Lamu or the established port of Mombasa, further south. Recoverable reserves are estimated at 0.75bn barrels. Explorers will also drill more wells in 2018.

The speed of progress may depend on whether Kenya's national politics remain calm, and whether communities in the Turkana area, which disrupted operations in 2017, can be persuaded they will get a fair share of future oil revenues. A delayed "early oil" scheme to send small amounts of Tullow's oil to the coast by truck may be a temporary solution in 2018.

Tanzania will also need to play catch up, if it wants to compete with its neighbour Mozambique as an East African energy hub. The two countries share the gas reserves of the Rovuma Basin. But while Mozambique's first LNG project, Eni's Coral South floating LNG facility, has been given the green light, Tanzania has yet to reach a deal with the majors exploring its waters—a cause not helped by legislative uncertainties over the security of foreign investment in the country's natural resources sector. Don't expect swift progress in 2018. Investors may need some convincing to sign off on a major Tanzanian hydrocarbons investment in the next year.

Source: Petroleum Economist

Ian Lewis is Africa editor at Petroleum Economist 

This article is part of Outlook 2018, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here

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