Uganda said in April it would build a pipeline for its oil through Tanzania rather than Kenya, which had wanted to secure the export route to the Indian Ocean.
Picking a route is vital for oil firms to make final investment decisions on developing reserves found in Uganda and Kenya, which are among a string of hydrocarbon finds on Africa's eastern seaboard. Tanzania has found gas offshore.
"The pipeline will have a length of 1,443 kilometres ... and is expected to be completed in 2020," Tanzania's ministry of energy and minerals said in a statement on its website.
It is understood that three oil firms operating in Uganda - London-listed Tullow Oil, France's Total and China's CNOOC - have all agreed to participate in the construction project scheduled to start in June 2017.
Officials said talks for a final investment decision were ongoing between the energy firms and the two neighbouring east African countries. There are also plans to establish a joint pipeline company by the end of this year.
Land-locked Uganda, which found oil in a western region around Hoima, said last year it would build a pipeline through Kenya, linking its fields to Kenyan discoveries in Lokichar and on to Lamu on Kenya's north coast.
But in March this year Uganda changed tack, saying it was now planning a pipeline from Hoima to Tanga on Tanzania's coast.
The managing director of the state-run Tanzania Petroleum Development Corporation (TPDC), Dr James Mataragio, confirmed to The Guardian in June that prerequisite technical and commercial agreements for the project are in the process of being prepared and everything should be ready by December this year.
“Negotiations are going on to finalise the Financial Investment Decision (FID) and establish the Pipeline Company (PipeCo) that will manage the entire project”, the TPDC boss said.
According to Mataragio, two particular documents - the “host government agreement” and “inter-governmental agreement” - will outline the roles of both countries in relation to the project.
The pipeline company (PipeCo), whose registration is expected to be completed by the end of the year, will comprise the two governments (Uganda and Tanzania) and the three international oil companies.
The proposed PipeCo firm will be responsible for soliciting the funds required for the project, with 60 per cent of the financing expected be sourced from loans and 40 per cent from shareholders’ equity. Mataragio said.