Uganda Opts for Tanzania Over Kenya for Important Pipeline

The writing has been on the wall for a few days, but today came the definite announcement: Uganda will partner with Tanzania, not Kenya, to build a pipeline and export its crude oil production.This is devastating news to the Kenyan government, which had hoped to use the same infrastructure to export its own oil production and will cost both Uganda and Kenya a lot of money:

Uganda will lose $300 million every year due to an increase of $4.07 in tariff per barrel, and Kenya will lose $250 million per year due to the increased tariff of $6.96 per barrel.

The reasons for Uganda’s decision are complex. Some concerns voiced about Kenya’s proposal relate to the difficult terrain in the Rift Valley, which can be avoided by passing through Tanzania’s Lake Victoria Basin. But the most important factor seems to have been limited confidence in Kenya’s government.

Kenya’s northern and Eastern provinces are notoriously insecure, due to intercommunal violence and conflicts in South Sudan, southern Ethiopia and in Somalia. Militants linked to Al Shabab regularly stage attacks with high casualty rates in areas that the pipeline will pass through, for example. The pipeline’s financing is still unclear and the designated export port at Lamu is still far away from completion.

In addition, Kenya’s delegation to the final negotiations seems to have inspired little confidence that they are on top of these problems in their Ugandan counterparts:

However, it has also emerged that the Kenyan officials participating in the Kampala talks may not have had all their facts right as they tried to address the concerns raised by Uganda over the northern route for the pipeline.

In contrast, Tanzania can offer an existing port, Tanga, and a very stable political environment. French oil giant Total has offered to finance the construction costs of the pipeline, as well as 40 percent of the planned Ugandan refinery at Hoima, while Tullow oil, the UK company which runs the Ugandan oil fields, seems to prefer the northern route through Kenya because it has interests along that pipeline corridor as well.

For the Kenyan government, this decision is about more than just the pipeline. The pipeline project is linked to a whole slew of infrastructure projects, ranging from a standard gauge railway to a high-capacity power transmission line linking Kenya and Ethiopia. Uganda’s decision will make it even harder to finance these ambitious projects and keep them on schedule.

From Uganda’s perspective, short-term profit seems to have trumped long-term decision making. President Museveni has recently been reelected in a contested election that turned out to be the most expensive in the country’s history, largely due to the plundering of state coffers to finance Museveni’s campaign and his outsized security apparatus. Uganda’s economic and human development performance has been lacking behind neighboring countries in recent years and the frustration among the overwhelmingly young population with the government is palatable. Uganda is broke and Museveni needs a lot of money quickly.

This is not to say that Ugandan worries about the Kenyan government’s reliability are unfounded. President Kenyatta and Vice President Ruto have presided over a disastrous military intervention in neighboring Somalia and have been unable to curb intercommunal violence, especially in the cost area.

From a regional point of view, the decision as both its pros and cons. On the one hand the competition between Tanzania and Kenya has a potential to produce future political rivalry. But as Ken Opalo points out

All else equal, this is probably a net positive development for the future of the East African Community (EAC). It is obviously a big financial and political loss for Kenya (and for that matter, Uganda) but it will dampen the idea of a two-speed EAC — with Kenya, Uganda, and Rwanda in the fast lane and Tanzania and Burundi in the slow lane.

ADF retaliates against Tanzania, kills two peacekeepers in the DR Congo

The Ugandan rebel group Allied Democratic Forces has ambushed a column of Tanzanian peacekeepers in the DR Congo. According to the United Nations, two peacekeepers were killed, thirteen are injured and four missing.

It is safe to assume that the attack comes in retaliation for the arrest of ADF’s leader Jamil Mukulu last week in Tanzania. Uganda has asked for Mukulu to be extradited and there was no reason to suspect that the request would not be granted.

With four Tanzanian soldiers now possibly in the hands of the ADF, the situation might have changed. It is unlikely that the Tanzanian government will push ahead with the extradition until the fate of its servicemen has been confirmed. This could in turn strain relations with Uganda.

Rich Links: Gas Revenues in Tanzania

  • “With the gas industry expected to be the largest player in Tanzania’s economy, the Tanzanian government could face substantial losses if they do not act to curb bad policies and practices.  Here are three major issues Tanzania needs to tackle in order to ensure they capitalize on upcoming gas revenues:”

  • “Mining prospectors will be able to apply for licences online and get feedback within 90 days, according to new amendments to the Mining Bill.”

  • “By the evidence of South Sudan’s budget, presented to parliament in late June, the country’s finance ministry has lost its mind.”

  • The Norwegian Ambassador to Ghana, Mrs. Hege Hertzberg, has urged the Ghana government to use the oil resource to transform the country’s economy from import dependent, to become a leading exporter on the African continent.

  • “Built by a consortium led by British company Globeleq, the 138 megawatt (MW) wind farm is one of Africa’s biggest – larger than the 120 MW Ashegoda windfarm that was unveiled by Ethiopia in October 2013, though not as big as the Tarfaya wind farm in south-western Morocco, which started producing energy in April and will eventually generate up to 300 MW of electricity.”

  • “Some neighbouring countries are less upbeat about the project. Citing two treaties, dating from 1929 and 1959, Egypt claims a historic right over the Nile. It fears that the dam will restrict the flow of water. […] “These treaties are now obsolete. We are entitled to build the dam,” says Alemayehu Tegenu, Ethiopia’s minister of water, energy and irrigation. “For a long time we derived no benefit from our river.”

  • “Unfortunately, Tullow could not repeat its African success story in Ethiopia. […] Sources told The Reporter that executives of Tullow decided to suspend drilling operation in Ethiopia. “They will pull out their drilling crew out of Ethiopia. They will take out their core staff to other projects in other countries and lay off the rest of the staff in their Ethiopia office.”

  • “Zimbabwe’s cotton industry will remain under pressure as international lint prices continue to wane with China’s imports expected to decline in the 2014/2015 season as the Asian nation shifts to domestic cotton for national reserves.”

  • “The duration of license now depends on the size and nature of mineral deposits, as well as the size of investment to be injected in a concession. This will be shown through a feasibility study conducted by the investor.”

Rich Links: land grabbing in Tanzania, Amnesty blames Shell for oil spills

As always, the best reads from around the internet on resource politics in Africa:

Land grabbing in Tanzania

High hopes meet reality for Tanzanian farmers and land owners:

I just gave my land because we were convinced by a politician that it would make us rich. I knew I would get money for the land, and also get a well-paying job when the [investment] company began operations. Now they didn’t do anything and they sold our land to another company we didn’t even know,

Analysis: The poisoned chalice of Tanzania’s land deals (IRIN)

Monsanto’s push for Africa

Monsanto, a U.S. company best known for its controversial genetically modified crops, is currently targeting African markets:

It gets problematic in the future, because the farmer has to continue to buy seeds from Monsanto instead of returning to the age-old way of growing maize, which is saving and reusing seeds.

Monsanto Brings Agro-Slavery to Africa (@lissnup)

Does Uganda benefit from its natural resources?

At the moment, the answer seems to be no and this needs to change:

Onesmus Mugyenyi, a policy analyst with the Advocates Coalition for Development and Environment, a local policy research and advocacy think tank, explained that Uganda’s poverty levels were closely related to its failure to sustainably exploit its natural resources.

Uganda: Country Needs to Exploit Its Own Mineral Riches (IPS/allAfrica)

Swiss company in trouble over handling Congolese conflict gold

Non-profit TRIAL has sued Swiss smelting company Argor-Haraeus for allegedly entering into business with Congolese warlords and conflict profiteers:

According to TRIAL, the gold in question was illegally mined by FNI and then sold in Uganda by a Congolese middleman, Kisoni Kambale, who trades in gold and owns an air transport company.

Congo-Kinshasa: NGO Files Complaint Against Swiss Company Over ‘Pillaged’ Gold (Deutsche Welle/allAfrica)

Amnesty International challenges Shell on oil spills in Nigeria

The international human rights organisation is not happy with the corporation:

Shell has claimed that… oil spill investigations are sound when they are not, that sites are cleaned up when they are not, and that the company is transparent when, in reality, it maintains very tight control over every piece of information – deciding what to disclose and what to withhold.

Advocacy Group Tackles Oil Companies Over Spills (allAfrica)

Amnesty International – ‘Shell Must Come Clean On Niger Delta Oil Spills’ (Deutsche Welle/allAfrica)

Shell’s False Claims On Niger Delta Oil Spills Exposed (Amnesty International)

Other stuff:

Rich links: diamonds and bushmen in Botswana

As usual, the web’s most interesting reads:

Diamonds and Bushmen

Charity Survival International alleges that the government of Botswana systematically uses access to water as weapon to drive the country’s Bushmen out of their diamond rich reservation. The Independent

South Sudan plans allocation of new exploration blocks

The East African country will hold an auction to sell exploration licences to new oil blocks. If exploration proves successful, additional oil production could significantly enhance government income. Voice of America

Tullow Oil stops exploration in Kenya

After demonstrations in Kenya’s Turkana region by local communities demanding a greater share of jobs and higher income from Tullow’s operations, the British company has suspended all exploration activity in the area. Kenya hopes to significantly add to its natural resources portfolio with oil deposits currently appraised by Tullow. Sabahi | the Star | African Mining Brief

Zambia first cancels, then reinstates tax on unrefined copper exports

Only days Zambia has cancelled a 10% export tax on unrefined copper and other minerals, the country’s president Michael Sata has ordered his government to reintroduce the tax. Lifting the regulation had been a key demand of international mining firms, which argued that Zambia doesn’t have the necessary smelting capacity to process all ores in the country itself and that the additional tax would make operations uncompetitive. African Mining Brief

The future of Tanzania’s mining sector

Tanzania sports quite a wealth of various precious metals, gemstones, fossil fuels and other minerals. But falling gold prices and power challenges have made some investors weary. Mining Weekly | Daily News

Other stuff

  • How can African countries use their oil revenue for lasting development? the Guardian
  • Angola has opened a training centre for oil industry related professions: Mining Review
  • Women are breaking into the male dominated mining sector in Zimbabwe: IRIN

Tanzania plans uranium mines

Several African countries are looking to enter the ranks of uranium producing countries. Tanzania and Malawi are probably furthest along this road, with Niger, South Africa, Central African Republic and the DR Congo all among current or past producers.

For those who want a quick introduction into Tanzanian plans to develop its uranium deposits, this article by Deutsche Welle provides some of the most important facts:

Not far from Tanzania’s capital of Dodoma is the rural area of Bahi. The small village in the heart of the country on Africa’s coast, though, is sitting on a proverbial “gold mine,” one that has raised eyebrows at both the national and international levels: uranium. Tanzania has been carrying out exploratory drilling operations for a number of years so that it might soon begin the real business of uranium mining. People who live in Bahia, however, have reacted to the drilling with skepticism. […]

 

Koczy recalled the risks of nuclear energy, pointing to the nuclear reactor catastrophes in Chernobyl and Fukushima. But she also said there were potential safety risks in Tanzania, which are high during the mining of radioactive ore. Uranium’s utility for Tanzania itself is very limited, Koczy said. The German parliamentarian criticized the fact that the large majority of mining licenses have gone to foreign firms, with the public having no oversight as to the profits secured by these companies.

Tanzanian Minister of Energy and Minerals Sospeter Muhongo views the future brightly, though. For workers, safety risks will not be an issue, he said. […]

 

In southern Tanzania, the uranium is thick and close to the earth’s surface. That brings yet another danger: A gust of wind can blow uranium dust from surface mining operations and into the surrounding landscape.

For CESOPE director Lyamunda and his organization further north in Bahi, the issue is clear: The best thing would be for Tanzania to desist entirely from mining uranium. His group is not alone in that opinion. At a conference in Tanzania that took place in early October, his call was supported by the International Physicians for the Prevention of Nuclear War and the Germany-based Rosa Luxemburg Foundation.

The Tanzanian project is also one of the focal points of the documentary “Atomic Africa“, which is worth seeing in full if you are interested in the topic. What do you think, should Tanzania and other African countries develop their uranium deposits and nuclear energy plants despite the great environmental and health risks involved?

Rich Links: Oil and Uranium across Africa

Quite a long list of noteworthy reading material this time around:

Falling gold prices lead to job cuts

Mining company AngloGold Ashanti Limited will lay off 400 miners in Ghana, reacting to falling prices for gold on the world market. Gold has fallen by $500 over the last months, coming down from a historic heigh point. The lay-offs in Ghana are the first signs of wider repercussions for gold miners around Africa. Mining Review

Oil – a blessing or a curse?

A series of articles from different media look at the benefits and drawbacks of petroleum exploitation for African societies. AllAfrica/This is Africa | AllAfrica/NewVision | AllAfrica/Deutsche Welle

Uncertain times for Somalia’s oil and gas business

Recent finds bring hope for new revenues for Somalia’s embattled government, but the recent attacks on a Kenyan shopping centre also put the remaining challenges for foreign investment under the spotlight. AllAfrica/Sabahi | Africa Confidential (subscription required)

Uranium mining around Africa

There is a rising interest in uranium mining across Africa. Recent articles look at projects in Tanzania and Botswana. Mining Review | African Mining Brief | AllAfrica/Tanzania Daily News

Petroleum exploitation in central Africa

The Jeune Afrique takes a look at the fortunes of the petroleum industry in central Africa. Jeune Afrique

East African states take stake in Ugandan refinery

The planned refinery project in Uganda, which will be provided with oil from the country’s nascent oil fields, has been given another boost with neighbouring states Kenya, Rwanda, Tanzania and Burundi agreeing to take a 40 per cent stake in the project together with the host country. The remaining 60 per cent will be financed by private companies involved in the exploitation of oil reserves. Engineering News | Africa Energy Intelligence

Benefication laws in Zambia lead to growing backlog for copper stocks

After the Zambian government has enacted laws forcing copper mining companies to process a larger part of their production in the country itself, those companies complain over limited smelting capacities. Stockpiles have been growing, according to the industry and threaten to block operations at the mines. Some observers allege that the bottleneck has been created intentionally by investors, to force the government to loosen the new regulations. Mining Review

Oil theft in Nigeria

A look at the origins and consequences of oil theft in Nigeria. Baobab | the guardian

Rich Links: Natural Gas in Tanzania, Nuclear Power in South Africa and More

As always, the best links from around the internet:

New policy on natural gas coming soon in Tanzania

The government of Tanzania is on the verge of passing a new national policy on natural gas exploitation. So far the country has no specific official policy in that sector and the new legislation wants to address specifically the issue of local content. AllAfrica/Tanzania Daily News (2)

South Africa aims for new nuclear power plants

The South African government pushes for the construction of new nuclear power plants to increase the generation of nuclear energy from 1,800 MW to 9,600 MW per year by 2030. Key financial decisions are planned to be taken this financial year. South Africa currently runs the only active nuclear power plant on the African continent and pursues a large nuclear capacity under the label of “clean” and indigenous energy. AllAfrica/SouthAfrica.info

Resources in the DR Congo

A detailed look at the trends and challenges of the natural resources sector in the Democratic Republic of the Congo. Ventures Africa

The dangers of the use mercury in gold mining

Mercury is used by the great majority of artisanal gold miners in Africa, numbering millions, but its use results in dramatic health problems. A new international treaty aims to reduce the amount of mercury used, but changing entrenched practices in local communities will be hard. The Economist

Search for oil kills whales off Madagascar

A sonar system, operated by Exxon Mobile to explore oil fields off the Madagascan coast, is the reason for the death of dozens of melon-headed whales. This is the finding of an independent scientific commission. Global Post

Three alternatives for South Sudanese oil

The governments of South Sudan and Kenya are currently planning the establishment of a new pipeline corridor to transfer Sudanese oil to the Indian Sea at Lamu. This article argues that the better alternatives would be to transfer the oil by either rail or road. AllAfrica/Pambazuka News

High hopes for Rwandan mining sector

The Rwandan government wants the country’s mining exports to triple by 2017. AllAfrica/Rwanda Focus