The tug of war for East Africa’s planned crude oil export pipeline continues, with the US promising to support Kenya in sourcing finance for the project, while Total, following a meeting with President Museveni, has strongly reiterated its preference for a route from Uganda to Tanga on the Tanzanian coast.

United States Ambassador to Kenya Robert Godec met with new Kenya’s Energy and Petroleum Cabinet Secretary Charles Keter on 5 January amidst speculation that the US is interested in supporting the project financially. Godec reportedly stated after the meeting that the United States is willing to assist Kenya in attracting private capital to the project.

Currently the figure being discussed is up to US$14 billion, which would make it the biggest infrastructure project ever developed in East Africa. In statements following the meeting, Cabinet Seretary Keter reportedly stated this could partly be financed through the Power Africa initiative. This would be a misunderstanding of the role of Power Africa, which is entirely focused on electricity generation and access, and wouldn’t appear to cover projects such as the pipeline.

If the US is interested in attracting private capital or supporting Kenyan government efforts at financing the project, it will come up against the same issues of cost and security.

Security issues across Kenya’s north west and north are well known and covered extensively by East Africa Politics & Security. A new concern for financiers will be the seemingly rampant corruption in the Kenyatta administration, particularly given suspicions around the US$2.75 billion Eurobond finance raised in 2014. Ambiguity still surrounds the financing. With a proportion set aside to cover local debt financing, over US$2.1 billion remained and was publicly promised to fund major infrastructure projects. To date Cabinet Secretary for Finance Henry Rotich has yet to identify any projects funded, and analysts have been unable to trace all the Eurobond proceeds across government budget books and Central Bank of Kenya reports.

The interest shown by Ambassador Godec appears contradictory. The United States Treasury has objected to International Finance Corporation (IFC) financing for Africa Oil, primarily to be used to develop the South Lokichar oil field.

In the meantime, Total has strongly reiterated its preference to route the export pipeline through Tanzania. This follows a meeting between Total Chief Executive Officer Patrick Pouyanné and Uganda’s President Yoweri Museveni on 22 December. Pouyanné stressed Total’s commitment to get the oil to market despite low oil prices, given that Total regards their
Uganda resources as relatively low cost.

Ernest Rubondo, the head of Uganda’s Petroleum Directorate, told The East African newspaper that discovery costs of Uganda’s oil are extremely low, at US$0.5 per barrel. Total will be keen to maintain a low cost base in evacuating crude oil.

Tanzania’s incentive to use the route as a natural gas export pipeline, as well as Tanzania’s proven experience in managing such projects makes the export route to Tanga attractive.