Regional media reports indicate that key participants in the project are yet to agree on the financing modality, put up a solid proposal agreed by the various oil companies, before it is placed on the Ugandan government side and then to the Tanzanian side. All this was supposed to be preliminary work that was to have been done before inking the contract.
There are structural issues on both sides that need to be resolved, as land is a big problem in Uganda with its dense rural areas compared to Tanzania, and where communities (chiefdoms that still make local decisions) have plenty of autonomy on land use, values, compensation, etc.
Things are easier this side of the border when it comes to land, but as misfortune never comes alone, we have our side of problems, that for all intents and purposes this comes across as a strategic plan more or less controlled by the state. It becomes a bit hard to see how it operates as a consortium of companies in Uganda and as TPDC, here.
Other developments in the region appear to be taking their toll, eroding the ground upon which the pipeline project stood, for instance the singular option of passing it through Al Shabaab infested territory in the shorter Kenyan route.
Now there is a safer option, the standard gauge railway that is coming up fast and likely to rapidly link with oil bearing areas once it reaches the Ugandan hinterland, in which case oil companies would need franchised wagons and tankers for freight.
This hasn’t been discussed intensely as yet, but given the politics of land compensation involved, and ownership issues of the pipeline, it is real.
While we are not trying to rub off the project in a hurry, there is a lesson that is already being filtered in the issue, that diplomacy per se isn’t a formula of achieving big things in economic activity but situations on the ground, a ‘win–win’ situation for the companies involved as well.
There was an aura that there is a bonanza out there once there is a pipeline, whereas sober economics needs expenditures to be minimal so that companies will be ready to put money into them. Faced with bureaucrats who can scarcely finish negotiating on any project, save a fully funded or loaned project owned by the government, it can’t move.
It means that there is a sort of opportunity squandered in case the project doesn’t take off the ground. Both Kenya and Tanzania will have standard gauge railway systems where playing them off one against the other for a lucrative oil transporting franchise is easier for the companies. Laying all their eggs in one pipeline basket might not be their best option after all.