East Africa: Total, Tullow Differ On Choice of Oil Route
Posted on :Tuesday , 20th October 2015
Oil companies Total and Tullow agree with the Ugandan government on low tariffs for the transportation of the crude oil through a pipeline, but they differ over the choice of route.
Tullow Oil has no objection to the northern route (Hoima-Lokichar-Lamu Port) as proposed by the Kenya government, but Total has raised concerns over the route, while China National Offshore Oil Company (CNOOC) is neutral.
The differences were clear last week when Tullow and CNOOC skipped a ceremony for the signing of a Memorandum of understanding (MoU) paving the way for a feasibility study on the southern route through Tanzania's Tanga port.
"We are evaluating all viable options and the Tanzania route is one of them," Total's corporate affairs manager Ahlem Friga-Noy said. The French firm has expressed its concern over the security in northern Kenya, high cost of building the pipeline through the north because of its remoteness implying that other infrastructure like water, electricity and roads will be required even before pipeline construction begins.
Tullow wells:
In the past, Total has also raised concerns over the terrain in the north an undulating topography compared with the southern route, where the ground is slopping in extended segments. This makes the northern route technically more challenging and time-consuming.
Sources indicate that Tullow is pushing for the northern route because it has made discoveries of an estimated 600 million barrels of oil in Turkana Basin, where the pipeline is proposed to pass.
A pipeline going through the Turkana basin would increase the value of the reservoirs.
Kenya is also interested in developing the remote north by accomplishing the pipeline which is a major component in its ambitious Lapsset project.
Tullow, which contends that it has better volumes and values in Uganda, argues that a pipeline through any route in Kenya is viable as the tariff would be shared when Kenya's oil joins the pipeline.
Tanzania has not yet made oil discoveries, but it has substantial quantities of gas. Tullow discourages the southern route on the grounds that Uganda will foot the tariff alone since Tanzania has no oil to feed the pipeline.
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