Kampala-Kigali oil pipeline estimated at $193.6 million

CONSTRUCTION OF the much-needed oil pipeline from Eldoret in Kenya via Kampala in Uganda to Kigali, Rwanda’s capital city, will cost stake holders in the projects up to $193.6 million, a senior official with the company that carried out the study has said. According to Christopher Ellsworth, the Director of Energy Markets and Forecasting with the US-based Science Application International Corporation (SAIC), the pipeline has been valued at this amount for the 2010-2020 period at a levelized tariff of $142.44/cum. “This is below the current $48/cum through trucking costs which indicates that the pipeline is economically superior to current the transport mode,” Mr Ellsworth said.

The US expert has been in Kigali where he also attended a recent government-sponsored workshop to assess progress on the pipeline project. SAIC was contracted earlier this year to carry out the feasibility study for the project.

Mr Ellsworth said a preliminary review of the population centres, topography, and existing road network connecting Kampala, Kigali, and Bujumbura (capital of neighbouring Burundi) shows that the pipeline route will probably follow the existing main road high-way. Increased demand for petroleum products as the economies of Rwanda, Burundi, and Uganda expand has left the Kenya Petroleum Corporation unable to supply enough. The company said last year that it needed $145 million over five years to upgrade its pumping capacity on the the Mombassa-Kisumu pipeline.

The three countries have been sourcing products from Kenya’s Eldoret refinery which cannot cope with demand, forcing the central African countries to purchase fuel directly from Mombassa and Nairobi. A Chinese firm has already started construction of the pipeline extension from Nairobi to Kisumu in Western Kenya.

Mr Ellsworth said, however, that the Kigali – Bujumbura section of the pipeline extension, estimated at a nominal $53.7 million, is economically unviable compared to the current cost of trucking. “The levelized tariff is $55/cum which is far above the current $40/cum trucking cost”, he explained, adding that for the case of Burundi, the pipeline may not be extended before 2020 when it could be economically feasible.

Rwandan officials want the pipe-line operational within the next three years but observers say the scheme depends on the willingness of the Ugandan government.
Sources contend that the effective implementation of the pipeline to Kigali will entirely depend on the seriousness of the Kampala regime to extend the pipeline from Eldoret to Kampala, given the recent discovery of oil deposits.

The Rwanda State Minister for Communications and Energy, Albert Butare, told local news services that discussions with Ugandan and Kenyan officials have yielded a “way forward”. The first meeting between the three governments was held in Kampala on 18 June to discuss the institutional framework through which the project will be implemented. On 30 August, a draft Memorandum of Understanding that proposed creation a Joint Coordination Commission was finalized. It is also anticipated that entry into the East African Community by Rwanda and Burundi could play an important role in facilitating the structures and activities necessary for the project’s implementation.

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