What does the EACOP Bill mean for Africa’s most controversial pipeline project?

Since TotalEnergies announced its acquisition of TullowOil’s shares in the Tilenga oil project and the East African Crude Oil Pipeline (EACOP), Uganda has crystalized a lot of the global tensions around the debate of development vs. environment. By developing the 1.7 billion barrels of contingent oil resources discovered around the Lake Albert, TotalEnergies is expected to produce 190,000 barrels of oil per day before the end of this decade, propelling Uganda into the club of African oil producers. The country would be producing as much as Ghana and Gabon currently, generating significant revenue for its state coffers.

To export that oil to global markets, TotalEnergies is building the world’s longest heated crude oil pipeline, a 1,443km line linking Uganda’s oilfields to the Tanzanian port of Tanga. Once again, this means revenues for the state of Tanzania via transit fees. The integrated development will result into billions of dollars injected into both economies, support the development of infrastructure, and create jobs in the process.

Despite growing opposition from environmentalist groups and NGOs, and the withdrawal of a few of its financiers, the project is progressing. On September 1st, the Ugandan Cabinet approved the EACOP Bill that gives significant support to the pipeline’s construction and operation by granting it four different fiscal packages. The Bill is seen as giving strong backing to the EACOP Company made of TotalEnergies (62%), UNOC (15%), TPDC (15%) and CNOOC (8%).

The Government of Uganda, which had long delayed the initial takeover of TullowOil’s assets by TotalEnergies on the back of fiscal disagreements, is now getting generous. It is notably proposing tax packages on corporate income tax and value added tax (VAT) under which the EACOP Company will be exempt of the former for ten years and will be subject to zero rated VAT for its export of goods and services. The exemption of corporate income tax for ten years is significant given that the standard rate applied to resident and non-resident corporations in Uganda is of 30%.

In addition, the EACOP Company is set to benefit from a package on withholding tax as well as an exemption from paying transit fees in Uganda. The withholding tax is fixed at 5%, following the terms set within the previously signed Host Government Agreement (HGA).

The set of fiscal incentives granted to EACOP notably follows the withdrawal of several financiers and banks from the project. Earlier this year, BNP Paribas, Société Générale & Crédit Agricole reportedly withdrew their funding commitment on the back of human rights concerns

Read more

Sahara Tanzania doubles its petroleum products storage capacity

Earlier this year, Sahara Tanzania announced the expansion of its petroleum products storage capacity in the country to 72 million liters. Nigerian energy and power conglomerate Sahara Group has been present in Tanzania since 2015, starting with 10 loading arms and four storage tanks with a combined storage capacity of 36m litres. It has now expanded such infrastructure to 20 loading arms and eight storage tanks. The infrastructure expansion is ine line with the company’s commitment to support products availability in East Africa. Sahara Tanzania is in fact currently involved in expanding storage capacity of automotive gas oil, premium motor spirit and Jet A1. The company has notably committed to build two liquefied petroleum gas (LPG) tanks with a capacity of 6,000 cbm. Sahara Group is one of the largest and most integrated African energy and infrastructure conglomerates with significant business interests across the upstream, midstream, downstream, power generation and logistics & trading industries across the continent and globally. The group started in 1996 as Sahara Energy Resource to trade petroleum products, entering Ghana in 2000, Côte d’Ivoire in 2001, Tanzania in 2015 and Zambia and Guinea-Conakry in 2017. Since 2017, it has consolidated all its petroleum trading, marketing, distribution and storage activities under a single entity, Asharami Synergy.

APT receives 2-year extension to meet gas exploration targets onshore Tanzania

ARA Petroleum Tanzania (APT), which took over the operatorship of the onshore Ruvuma PSA in Tanzania last year, has received a two-year extension of the license. The granting of the extension was necessary to complete key exploration activities on the block, including the acquisition of 200 km2 of 3D seismic data and the drilling of the Chikumbi-1 exploration and appraisal well (formerly known as Ntorya-3). Completion of the exploration programme will further support the conclusion of negotiations of the Gas Terms for the Ruvuma PSA and pave the way for the development of the Ntorya Gas Project. The development of the Ntorya gas accumulation has the potential to be Tanzania’s next big domestic gas project. Located in southern Tanzania where Maurel & Prom produces gas from the Mnazi Bay PSC since 2015, Ntorya used to be operated by Aminex’ subsidiary Ndovu Resources with a 75% interest before APT took over operatorship of the asset with a 50% interest last year. Aminex has since then retained a 25% interest in the license. The Ntorya accumulation is located within the onshore Ruvuma Production Sharing Agreement (PSA) signed in October 2005, which contains the Mtwara licence and the Ntorya development area, the latter being currently in negotiation. The PSA was operated by Tullow Oil until 2011 and saw the successful drilling of the Likonde-1 well in 2010, the Ntorya-1 well in 2012 and the Ntorya-2 well in 2017. Both Ntorya-1 and Ntorya-2 successfully tested gas with flow rates of 20 MMscf/d and 17 MMscf/d respectively, while Likonde-1 encountered gas shows. As a result, Ndovu applied to the Ministry of Energy for Tanzania in September 2017 for a 25-year development licence over the Ntorya area, with the application recommending the drilling of one well, the acquisition of 3D seismic over the Ntorya Field and the construction of a raw gas pipeline tied to the National Gas Gathering System at the Madimba plant, starting point of Mnazi Bay-Dar es Salam gas pipeline. In April 2020, Ndovu Resources secured a one-year extension of the Ruvuma Licence, almost three years after it applied for it. The extension did not provide enough time to complete the exploration programme, reason why new operator APT had to apply for another one which was secured a lot faster.