Eldoret-Kampala Pipeline Compensation for March.

East African Business Week
28 February 2009
By Paul Mwijagye

The construction of the much awaited Eldoret-Kampala oil pipeline is hoped to begin in April.

Preparations are underway to compensate the people that will be affected by the project.

In an interview with EABW, the energy ministry's commissioner for petroleum, Ben Twodo said the survey had been completed and submitted to the chief government valuer. He, however, noted that since the handing over of the survey not much progress has been realized.

"The chief government valuer has done some work though not all and so far there is nothing that we can say will stop the commencement of the project," Twodo said.

On July 18, 2006 Tamoil East Africa won a 20-year concession to finance and extend the 320km oil pipeline from Eldoret to Kampala at a cost of $72 million.

The work has been postponed several times, hampering stable fuel supply to Uganda, a situation that has led to escalating prices.

A recent analysis of the economic indicators for the second half of 2008 reveals that in spite of the fall in international crude oil prices by over 70%, between early July 2008 and early August 2008, there has been no significant reduction in fuel prices in Uganda.

Average pump prices in Kampala for petrol and diesel remained as high as Shs2,650 and Shs2, 200 respectively in February, 2009.

In upcountry areas, the price is higher by about 15%-20%.

This has resulted in increased food prices, high commodity prices and transport costs which in turn contributed to high inflation rates. Food crops inflation rose to 33.7% in August from 20.5% in July 2008 on account of high transport costs.

The cost of transporting oil varies between $38 and $42 per cubic metre, an expense that is expected to decline significantly with completion of the project.

Tamoil has a 51% stake in the project, while Uganda and Kenya governments are holding an equal share of the remaining 49%.