KAMPALA - The planned oil pipeline from Kampala to Kigali will drastically help cut down the costs of petroleum products in the country, the State Minister for Energy has said.

Eng. Albert Butare, who together with the Ugandan Minister of Energy and Mineral Development, Daudi Migereko, and Tamoil Africa Holdings Chairman and CEO, Dr Ali Shamekh, signed a memorandum to execute the plan, with the Libyan firm, tasked to first conduct a project feasibility study.

The preliminary deal was thrashed out in the presence of Presidents Paul Kagame, Yoweri Museveni of Uganda, Col .Muammar El Gadaffi of Libya, Pierre Nkuruzinza of Burundi, Mwai Kibaki of Kenya and Abdullah Yusuf Ahmed of Somalia, in addition to a host of Government and business leaders from those countries.

The construction of the 600 kilometer-long pipeline will depend on the completion of a similar pipe from Kenya’s Eldoret port to Kampala, a project also to be implemented by Tamoil Africa Holdings.

Once the Kampala-Kigali pipeline is complete, it is hoped that a similar project will then extend to Burundi and eastern DR Congo, which also survive on oil supplies transited through Kenya, where a post-election crisis recently pushed fuel prices up.

Butare said in an interview that under the deal, Tamoil Africa Holdings will "build, own, operate and transfer (BOT), the pipeline” on its own finances.

In return, Rwanda will pay back "through tariff per litre” when the pipeline is finally in operation. "They will foot the cost and only charge us a tariff per litre of fuel. But whatever amount, it will be far much less, than what we currently incur.”

He also added that transporting petroleum products in a pipeline was relatively less risky compared to the current mode of transport.

"Transporting fuel by lorries is highly risky,” he said.

Previously, there have been cases of accidents involving Rwanda-bound fuel tanks, resulting in millions of losses.

"We are going to have project offices in Kampala and Kigali to ensure the fast-tracking of the project. We are not going to incur any costs in the construction but after its construction, we shall negotiate with a team of experts and the construction company the cost of the project to determine the tariffs that will be charged,” Butare told The New Times last week.   
                                   
He added: "We have been getting our fuel by road using trucks and this process spoils our roads and it is more expensive. After the construction of this oil pipeline, we will be able to receive fuel at a cheap price and this will reduce oil prices in the country.
 
"We will be charged per litre according to what is delivered in Kigali. This will make it much cheaper and efficient compared to costs of transporting fuel using tracks.”

Subsequent to the signing, technical studies by the construction company are expected to begin early April through May this year.

Under the MOU, the signing of the final agreement is expected to take place during the second half of 2008.

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