Construction of Uganda’s first 358-kilometre oil pipeline from Eldoret to Kampala remains firmly behind schedule, three years after the deal was signed.
The delay is roundly blamed on the parties involved, which continue to ignore deadlines and break promises.

Discussions between the principals; Tamoil East Africa Limited, the Libyan company that won the bid to build the 358-Kilometre pipeline and government are on hold after the two failed to agree on crucial positions like the availability of land for construction of the pipeline.

The Observer has also been told that Tamoil is weighing all available options to change its original plan of building a pipeline that pumps refined fuel in one direction (i.e to Kampala), to one that would transport the fuel in both directions. 

The delay raises further uncertainty over the future of the country’s oil industry, which has lately come under sharp scrutiny from both local and foreign players.

It is also a nagging test for prospective investors’ patience, who are more likely to hold back their investments into the country’s oil industry until a clear roadmap has been agreed upon.

It is not clear whether there have been any new deadlines set and penalties in case there is further breach of contract.

Habib Kagimu, the chairman of Tamoil, says the project’s delay is partly caused by government’s failure to live up to its end of the bargain. “We haven’t got the land,” he said, adding that “government is obligated by the agreement to give us land.”

One square mile of land outside Kampala was acquired by government in February, where the pipeline's inland terminal will be built. However, acquiring land along the pipeline's 224-Kilometre route within Uganda remains elusive.

According to the Ministry of Energy and Mineral Development, so far, the government has secured land only for the inland terminal, and has completed the evaluation of some 130 kilometres between Jinja and Tororo.

Tamoil, itself, has not been short of blame for the construction holdup. Tamoil, perhaps excited by the oil finds in Uganda that now total more than 2 billion barrels, and estimated at a value of $50 billion, has decided to change the design of the pipeline to reap maximum benefits.

Tamoil wants the oil to be pumped to and from Eldoret. The delay and the changes therein will definitely push up the cost of the project. Simon D’Ujanga, the minister of State for Energy, confirmed that there will be a higher figure attached to the project.

Should the cost of the project finally increase, it is bound to raise another debate. This is because Tamoil’s financial capability to pull off the oil pipeline project, whose original value was placed at $80 million, has been questioned. It was not possible to get hold of Tamoil’s financial statements as the company appeared to have no website of its own.

However, Engineer Paul Mubiru, the Director Energy and Mineral Development, in the Ministry, dismisses any argument that Tamoil is in some sort of financial dilemma.

In an email to The Observer, Mubiru said: “Prior to signing the Heads of Agreement (HOA) in which Tamoil East Africa Limited was appointed as the Private Partner in this venture, due diligence was carried out and the report confirmed that TEAL is technically and financially competent.”

The oil pipeline, which would link the country to the coast of Mombasa, is crucial to landlocked Uganda. Fuel takes up the largest part of many companies’ costs.

The high fuel costs, which are brought about by high transportation fees, have constrained profit margins and stifled efforts to hire more staff to grow businesses. However, it is believed that with the oil pipeline in the country, the cost of fuel is expected to gradually go down.

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