EAC oil agreement: Here’s why it’s a big deal for Tanzania

Tanzania has recently secured a major oil pipeline deal with Uganda, signaling a significant economic and strategic triumph for both nations. The Kud oil export pipeline, which is set to run from Uganda to the Indian Ocean at Tangaport, has been at the center of attention, with Tanzania's President Samia Suluhu Hassan traveling to Kampala in her first foreign trip as head of state to sign the tripartite agreement on behalf of her country. This historic agreement represents a major win for Tanzania's private sector, government, and the Ugandan government, as it has been a long-awaited deal that dates back to Uganda's oil discovery in 2006. The signing of the host government agreement between the two countries signifies the resolution of pending issues that have been under negotiation for over a decade, setting the stage for a transformation in revenue generation once the project is completed. The economic valuation of the pipeline, which is expected to generate over $3 billion in revenue for Tanzania, is a clear indication of the potential economic impact this project holds. With the first tankers of oil expected to move from Uganda through the pipeline to Tanga port in 2025, the economic benefits of the project are anticipated to be substantial, leading to a potential increase of one to two percent in Tanzania's GDP. The construction of the pipeline is also expected to create significant employment opportunities, with over 20,000 to 30,000 local Tanzanians set to be employed during the project's implementation. Additionally, the project will stimulate economic activity in various industries, with approximately 25 sectors set to benefit from providing goods and services to support the pipeline construction. Tanzania's competitive offer in terms of distance, terrain, security, and pricing played a key role in winning the pipeline deal over Kenya. By offering a route that was 1443 kilometers long, passing through Tanzania down to Tanga region, the country provided a cost-effective and safe option for the project. The competitive pricing and concessions offered by Tanzania, including a reduced fee of $12.73 per barrel and favorable tax arrangements, tipped the scales in its favor, leading to the relocation of the pipeline route from Kenya to Tanzania. The strategic decision to choose Tanzania for the pipeline project is expected to have long-lasting benefits for both nations, paving the way for increased economic cooperation and resource utilization. As the final investment decision for the project is set to be made in the coming months, the focus now shifts to the implementation phase, with construction expected to commence by mid-2021. The completion of the project is poised to bring about a significant boost to Tanzania's economy, creating a ripple effect of growth and development across various sectors. The successful negotiation and signing of the oil pipeline deal underscore Tanzania's capabilities in fostering strategic partnerships and attracting major investments that hold the promise of prosperity for the nation.