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Real-time TRADEGATE AG - 07/19 11:00:15 am

Uganda Agrees New Oil Tariff With Pipeline Investors

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05/16/2019 | 07:41 am

By Nicholas Bariyo

KAMPALA Uganda--Uganda has agreed a marginal hike to the tariff it will pay to ship crude through a planned export pipeline, unlocking the latest hurdle for the long awaited development of the East African nation's vast oil fields, the energy and minerals minister said Thursday.

After months of negotiations, Uganda agreed to pay $12.70, up from the original $12.20, for each barrel shipped through the planned 800-mile pipeline to the Indian Ocean port of Tanga in Tanzania, Irene Muloni said.

It's boost for the country's efforts to develop it's vast crude oil fields, estimated to contain as much as 6 billion barrels, whose development has stalled for years due to lack of infrastructure facilities such as an export pipeline or a refinery.

"Government has reached an agreement with joint-venture partners on the tariff and the business model for the project is being reviewed to reflect the new position," Ms. Muloni said.

The joint-venture partners, including French oil giant Total, have been pushing for a higher tariff ahead of financial close for the $3.5 billion project, amid renewed fears about future global oil prices. A spokeswoman for Total's unit in Uganda couldn't be reached for immediate comment.

Total, China's CNOOC and the U.K.'s Tullow Oil are currently developing the oil fields, and hope to produce as much as 220,000 barrels a day by 2023.

South Africa's Standard Bank and Japan's Sumitomo Mitsui Banking Corp. are helping in raising credit to fund the pipeline project.

Uganda's hosts East Africa's largest undeveloped oil assets and their commercialization could turn this coffee growing nation into a major oil producer in Sub-Saharan Africa. However, Fitch Solutions warns that delayed construction of the pipeline poses significant downside risk to the sector.

Write to Nicholas Bariyo at nicholas.bariyo@wsj.com

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