French oil firm Total E&P has suspended all its activities in the Sh 130 Trillion Uganda-Tanzania oil pipeline.
The East African Crude Pipeline (EACOP) was suspended after the collapse of deal where Tullow Oil wanted to sell 21.5 percent of its stake in the Uganda oil fields to its partners China National Offshore Oil Company and Total Oil.
The suspension of the deal was accompanied by the firing of employees of both Total and China National Offshore Oil Companies.
“The collapse has meant uncertainty in terms of who will meet what cost in developing the project, which is meant to have a similar shareholding structure like that of the oilfields.
The share transfer agreement was canceled because the Ugandan government and Tullow did not reach a consensus on the tax handling of the transaction.
This brings to a standstill oil commercial production in Uganda which boasts of rich oil reserves exceeding 6.5 billion barrels.
The Museveni led Government lacks the good infrastructure to export the oil.
Nonetheless, Jimmy Mugerwa, the country manager of Tullow Oil Uganda said that following the collapse of the deal, it will be difficult for Tullow to attract a new investor to buy into its Uganda oil fields.
“Getting in a new investor will be tricky. For starters, few investors, if any, are willing to strike a deal of this size if oil majors such as Total E&P and Cnooc are against,” he said.
The EACOP is expected to have a length of 1445 km at a cost of $ 3.55 billion and a diameter of 24 inches, it will pass through neighboring Tanzania to the Indian Ocean port of Tanga.
Upon its completion, it will be the longest heated crude oil pipeline in the world.
Featured Image Courtesy: www,orderuganda.com