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Kenya-Uganda Pipeline Deal Delayed Again

Published: 20 October 2006
The Kenya-Uganda pipeline project, which is set to connect the two East African countries between Eldoret in western Kenya and Kampala, the capital of Uganda, is in crisis yet again after it emerged that the TamOil East Africa Ltd, which won the bid to construct the pipeline, does not have the financial resources to complete the project. In July, Tamoil won the deal to construct the 320-km pipeline under a build, own, operate, and transfer (BOOT) venture where the Kenyan and Ugandan governments would retain a 24.5% stake in the project, while Tamoil would hold a 51% stake (see Sub-Saharan Africa: 26 July 2006: Tamoil Wins Kenya-Uganda Pipeline Bid). The East African newspaper reported many serious issues regarding the financial integrity of Tamoil Holdings Ltd, the Libyan state-owned firm of which Tamoil East Africa is a subsidiary. The Joint-Coordination Committee (JCC), co-chaired by the permanent secretaries of Kenya and Uganda's Energy Ministries Patrick Nyoike and Fred Kabagambe-Kaliisa, respectively, have queried Tamoil's ability to fund the project. According to minutes released from a meeting of the two governments in August, the JCC determined that "it was unclear how the money will be raised as well as the terms of the financing, as there was no clear financial plan”.
Significance: The mess surrounding the proposed pipeline goes from bad to worse. The JCC is unsettled by Tamoil's involvement because of the company changing its personnel for the project and also its uncertain financial integrity given that it is being linked to a bid from Dutch firm Oilinvest Holdings. Because of the increased anxiety over the project, the JCC has now introduced an exit clause in its negotiations with the company. It is not known whether the JCC will commence talks with CPPE, the Chinese consortium that came second in the bid for the pipeline project.
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