Kenya, Uganda settle on crude pipeline route

Kenya and Uganda have reached a final decision on the route for a crude pipeline linking their newly found oilfields to the Kenyan coast, an important step for oil firms to make a final investment decision, the countries' presidents said on Monday.

Oil executives have previously said they cannot make progress with their final investment decision on developing discoveries in Uganda and Kenya until the pipeline route and related costs were clear.

Uganda has an estimated 6.5 billion barrels of crude reserves in its fields in the country's west near the border with the Democratic Republic of Congo while Kenya estimates its recoverable reserves at about 1 billion barrels.

A statement issued after Kenyan President, Uhuru Kenyatta's visit to his Ugandan counterpart, Yoweri Museveni, said: "The two heads of state agreed on the use of the northern route, that is Hoima - Lokichar - Lamu for the development of the crude oil pipeline."

The statement said the implementation of the pipeline route would be subject to Kenya guaranteeing the security on its side of the pipeline, the financing of the project, and a transit fee not higher than would be payable on any other alternative route.

"The presidents agreed ... implementation of the project without further delay," the statement said.

Two possible routes had been proposed, with the second one following the route of an existing products pipeline further south running to the port of Mombasa.

Alongside the pipeline on the corridor of land in the north of the country to Lamu, Kenya wants to build a new port to serve the region.

It says work on Lamu port has begun, but experts say a spate of militant attacks in the region that borders Somalia have raised concerns about security of the pipeline along that route.

A fall in oil prices in the past year has knocked other oil projects off the agenda, but analysts say the Kenyan and Ugandan plans are unlikely to be shelved because they are relatively easy and cheap to access compared with offshore finds.

Joseph Njoroge, Kenya's petroleum and energy ministry, said in June that once a decision on the route was made, the pipeline's construction could be completed by about 2018 or 2019.

A spokesman for Britain's Tullow Oil, with stakes in Uganda and Kenya, said in June Tullow expected to decide on whether to proceed with investment in late 2016.

France's Total and China's CNOOC are also investing in Uganda, while Tullow's partner in Kenya is Africa Oil.

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