Wednesday, 24 January 2018

Will Total's entry into Kenya Kill Hoima-Tanga Line?

Alternative Route Map: Which will it be?
 The French- Oil Major, Total SPA, has finally been allowed to buy the 25 percent stake held by Maersk Oil exploration international in Lokichar oil fields in Kenya.
 But to get the government’s nod, Total Spa had to “commit itself to the export of Kenyan oil through the Lokichar -Lamu oil Pipeline only.”  That is a major retreat from Total’s position stated last August that it will lobby Kenya to evacuate her oil through the Tanzanian Port of Tanga.
Total SPA, remember, engineered Uganda’s change of mind to evacuate its oil through Tanzania.  The shift, which tossed out of the window an earlier MOU between Kenya and Uganda to evacuate their crude through Lamu Port, soured diplomatic ties between Kenya and Tanzania.
The shift also caused a fall-out between Tullow Oil and Total SPA which ended with Total elbowing Tullow out of Hoima oil fields in Uganda.  Given these circumstances in Kenya, Total was entering into an already toxic market.
It had to tread carefully in Kenya.  Apart from the toxic relationship it had created, Kenya’s Oil Pipeline is an integral part of the Lamu Port- Ethiopia- South Sudan development corridor, LAPSSET. On that score alone Kenya would brook no compromises. Further, it had firm agreements in place. One, the Kenya government had already entered into a Joint venture agreement with the previous set of Oil explorers, which included, Tullow Oil, Africa Oil, and  Maersk to build the oil Pipeline to the proposed Lamu Port.
Two, the JD had already contracted the feasibility study that involves the Front End Engineering Design-FEED. Three, Kenya’s contract with the explorers includes a clause that allows Kenya to acquire a 33 percent stake in the Oilfield once found to be commercially viable. In pursuit of this clause, Kenya is preparing to float the Kenya National Oil Corporation’s stake in Nairobi and London stock Exchanges to raise US$1 billion to buy the stake next year.
That means that Total SPA’s 25 percent stake will be diluted further to about 14 percent, leaving Tullow oil, which owns 50 percent stake and National Oil Corporation as the majority stakeholders. The purchase by Kenya National Oil Corporation makes it difficult for Total Spa to use its financial muscle to bulldoze its will.
Total’s sensitivity on the toxicity of the Kenyan market was demonstrated by the fact that, the CEO, Patrick Pouyanne, whose comments last August was deemed reckless, kept out of the meetings that won Kenya’s nod. Instead, they send Momar Nguer, the President for marketing and services to secure the agreement. Momar Nguer was for a long time the MD of Total oil Kenya.
Where does Total’s “commitment” to Lokichar- Lamu Pipeline leave the proposed Hoima-Tanga Pipeline? Hanging in the balance, analysts say. In Kenya, Total will share the cost of building the US2.1 billion pipeline with its partners in a deal that is already firmed. At the most, she will cough US$500 million. 
In contrast, the company was to foot Lion’s share of the bill, if not all of it- a whopping US$3.5 billion- of the Hoima-Tanga Pipeline.  Will Total SPA choose to cut its losses and turn to the original Hoima-Lokichar- Lamu route? Hoima in Uganda is 500 Km from Lokichar in Turkana county, Kenya.
To export Kenya’s Oil through Tanga would have meant building a 500Km pipeline westwards to Hoima from Lokichar basin, and abandoning the 880Km Lokichar-Lamu section. Following the same Logic, Uganda’s oil could also be exported from Hoima to Lamu and abandon the Hoima- Tanga section. Uganda, it must be noted, is only interested in exporting her oil at the least cost. Could a price-war between Tanzania and Kenya ensue? And can Tanzania win on this score? Tanzanian offered to charge Uganda US$12.20 per barrel transported through her territory. Can Kenya offer a better deal? That remains to be seen.
Despite assurances that the Hoima-Tanga Pipeline will not be affected by Total’s entry into the Kenya Oil sector, that sounds hollow. It looks like payback time for Tanzania.  And Total engineered the second round of trouble for the Pipeline!
The deal itself was a misnomer. Total Oil has no interest in Tanzania at all having found no oil for its Licenses.  The shift to the Tanzanian route so angered Tullow Oil, the firm that discovered oil in Uganda back in 2006, that she sold her stake to Total Spa. But the sale is not a done deal since Total has yet to pay the full US$900 million tag.
Will Tullow buy back its stake in Uganda? Perhaps. Times have changed. Tullow is no longer fighting for survival. Rising Oil prices have made it possible for her to borrow. So far she has secured a US$2.25 billion war chest to fund further exploration.
Two, Tullow will stake a claim on 50 percent of the US$ 1 billion Kenya will pay for a piece of the pie in Lokichar Oilfields. And even if they share equally at 33 percent, Tullow’s war chest will still be enough to power her way back into Uganda. If she does, say analysts, she will force a return to the original plan to evacuate Hoima-Oil through Lokichar in Kenya to Lamu port.
 The prospects for the Hoima-Tanga pipeline no longer look bright. A cloud is building on the horizon, which could condemn it. A school of thought has it that Total can still salvage the Hoima- Tanga Pipeline by completing the Kenya deal, the shop for a buyer of its stake and stick with Hoima Oil Fields where she is a majority stakeholder

An Oil Pipeline under construction
. Whether that works remains to be seen.
 In the meantime, the Kenya-Tanzania diplomatic relations will continue to be frosty.  If there is a second change of heart which favours Kenya, the relations could get worse. 
Tanzania has lost once before to Kenya on a mega-infrastructure project, the SGR project. Despite her spirited efforts to lobby Uganda away from Northern Corridor to Central Corridor, business dictats overruled the political dalliance.  Technical evaluation of the proposal to shift Uganda’s SGR to Central Corridor through the Dar-Salaam Port found it unviable.

 Will another technical evaluation find the Hoima- Tanga Pipeline also unviable? We cross our fingers. Should that happen, it will be President Magufuli’s lowest moment. 

Friday, 19 January 2018

Politicians in east Africa lead in scandalmongering

 Presidents:  Magufuli and Museveni:
 Friendship or deception?
 Politicians in East Africa, lead in scandal Mongering, we can report. 
They willfully distort facts to support fake corruption claims.  This is a malicious bid to sabotage government projects; bully “stubborn Officials” into submission and/or get contracts for their cronies or for themselves, we can report.
A survey of the most berated projects between 2015 and 2017 has established that the corruption claims were fake, driven by malice and selfish political goals.

In all cases surveyed, the allegations of corruption provided no concrete evidence and no one was ever prosecuted.  Instead, technical reviews established cases of malice and vendetta. There was no evidence of sincerity on the part of the critics either. The alleged cases were prosecuted in Press conferences and public rallies.

Four issues emerged in our survey to explain the fake reports: Protection of personal interests threatened by certain developments; tender brokerage, witch hunt, and Propaganda aimed at sabotaging the projects for political gain. In some cases, it was a combination of all four.

To achieve their nefarious goals, the scandal mongers alleged rip-off in the projects.  Among the leading scandal mongers in the region are President John Pombe Magufuli of Tanzania, Raila Amolo Odinga, the veteran oppositionist in Kenya and the Ugandan Parliament.

The three individuals and institutions publicly made claims of corrupt deals which turned out false. Among these is the cost of infrastructure projects such as the standard Gauge Railway from Mombasa to Kampala, highways, water dams and Oil Pipelines. All allegations were designed to sabotage the projects for political and malicious goals.

In 2016, Kenya’s opposition doyen claimed that half- of the US$2 billion raised in a Eurobond borrowing in 2014 was stolen. It was even alleged that the Federal Reserve, the Central bank of the US, helped hide the money. An investigation established that the money was transferred to the Central of Kenya’s account at the Fed.

Even the Controller and Auditor General undertook a mission to the Fed and is yet to publish his findings more than a year later. Investigations established Zero evidence of theft and the file closed. It was noted that the Eurobond, floated in the Irish stock exchange on June 14, 2014, hit the market on the same day that the Somalia based terror group, Al-shabaab, slaughtered over 100 people in Mpeketoni, in Lamu County, Kenya.

Analysts then suspected that the terror attack was designed to sabotage the Eurobond, by projecting Kenya as insecure. The market oversubscribed the bond by 400 percent.

In Uganda, a parliamentary Committee almost grounded the Standard Gauge Railway project by alleging massive rip off. The Parliamentary Committee on Infrastructure, headed by Dennis Sabiti, wrote a malicious report about Uganda’s SGR.  The committee alleged that the $2.3 billion tab for the  273 Km Malaba-Kampala section was a rip-off citing Ethiopia which had completed a 760Km line of just about the same amount.

The Tanzanian president, relying on this report, tried to talk the Ugandan President into re-routing the line from Mombasa to Dar-Es-Salaam through the Central Corridor. Magufuli willfully misled the Ugandan President, alleging that the Northern Corridor SGR was a rip-off as the Tanzanian line was cheaper.
This was in a bid to shore up his own line which is deemed unviable. The region to be served cannot generate sufficient freight tonnage to make the line viable. All countries, to be served, Including Tanzania, Burundi and Rwanda can generate only 8.5 million tones in line whose capacity is 17 million tones a year. Uganda’s freight, on the other hand, is 10 million tones a year, a mouthwatering prospect for the DIKKM.
Raila Odinga: Leading scandal
Monger in kenya

Picking the cue from the President, the contractors building the Tanzanian line- Turkey's Yapi Merkezi Insaat VE Sanayi As and Portugal's Mota-Engil Engenharia- also tried to get Museveni to give them the deal.

 However, evidence emerged of vendetta on the part of Mr. Sabiti.  The Politicians had an ax to grind with the Works Permanent Secretary. The PS has refused to fund the Parliamentary Committee’s two- week benchmarking trip to Ethiopia, Kenya, and China, irking the Politicians who paid him back by bad mouthing the project.  

Further, it emerged, the Northern Corridor Railway is superior to Tanzanian and Ethiopian lines. It also emerged that, no matter who constructs the line, the cost cannot be lower given the Ugandan terrain.  The Tanzanian and Ethiopian lines were cheaper because apart from being inferior, they also were upgrades of an old line, were constructed on a relatively flat terrain and had fewer or no bridges. 

 Bridges form 30 percent of the cost of constructing a Railway line and Uganda will have 27 Km of bridges. Those findings discredited the Parliamentary report and President Museveni stuck to the Kenyan link.

The same malicious tongue lashing was evident in the 51 Kilometre Kampala-Entebbe expressway. The road was branded the most expensive highway in the world by Uganda’s Parliamentary committee on statutory Enterprises, COSASE. The Committee wondered how a kilometer of Road cost $9.3 million and ordered the review of the same. 
The expressway is a four-lane expressway that boasts 19 fly-overs and bridges measuring 2.77 Kilometres. It also boasts of the 1.4-kilometer Nambigirwa Bridge, the longest four-lane bridge in Uganda and East Africa. The US$497 million expressway, is thus 206 kilometres of road on a 51 kilometre stretch. Consequently, its cost is US$2.4 million per kilometer which is the standard price for such roads elsewhere.

In Kenya, the Standard Gauge Railway line from Mombasa to Nairobi faced severe criticism regarding its cost. Some politicians even suggested that US$1 billion was stolen from the project thus inflating its cost.  It emerged later that the politicians, all members of opposition party, ODM, were funded by a tenderpreneur who lost the bid to get his chosen contractors build the line on a PPP basis.
Anne Waiguru: Lost her job to scandalmongering
The same tenderprenuer was also behind the Eurobond saga, paying the same politicians to dispense fake reports. He was also behind the NYS scandal which alleged massive theft of public funds. However, the parliamentary Public Account Committee could not even put a finger of the amount stolen and the culprits, calling instead of the investigative agencies to investigate an Officer.
Emerging evidence suggests that the committee, headed by Opposition MPs, was working to cover-up the lies spread by their leader. The Party itself leads a corruption tag team in Kenya.

The SGR line is already complete and operational. It has lived to its expectations of cutting travel time between Nairobi and Mombasa to four hours for passenger train and 8 hours for the freight train.
However, freight truck owners, some of them, politicians, are crying for their business is at stake: One fully loaded train puts 300 trucks off-the-road while a fully loaded 20-car passenger train puts 56 buses off the road.
The lesson from our research is: the media was taken for a ride as it parroted the allegations without interrogating them. They never questioned the experts, that is, the people implementing the project and asking to see the design documents and the contract agreements.

Short of this, the media helps politicians and corrupt businessmen to sabotage projects that would otherwise benefit our countries. We help condemn our countries- and ourselves - into a state of perpetual under development in the name of fighting corruption. 

Wednesday, 3 January 2018

Why Tanzania should abandon Regional SGR

The region marked in red is waste of
Good Money
Tanzania should abandon its regional SGR ambitions for now. She should instead focus on and develop a domestic SGR.  The regional SGR is spending good money chasing after bad money.

This is why; Uganda has chosen to build her Standard Gauge Railway link through the Northern corridor to the Mombasa Port. Uganda’s departure puts the viability of the Central Corridor and the Dar-es-salaam Port as a regional transport hub, in doubt.

The feasibility study on the Dar-Es-salaam, Isaka, Kigali, Keza- Musongati ( DIKKM) Railway Project, as the Central Corridor line is called, shows that the traffic flow on the line is low and that, to make a minimum return on investment, it must ship 8.5 million tons per year.

Tanzania on her own can generate an estimated 3.1 million tons of freight per year; Rwanda, including DRC 2.3 million tons and Burundi 3.1 million tons. These numbers are estimated at what is called the conservative low growth.
Kenya has already hit the ground
 running, attracting Uganda

Higher freight traffic, says the feasibility study, is possible if the Railway line diverts part of the traffic that is shipped through the Northern Corridor.  This is why, say analysts, the Tanzanian government, attempted to woo Uganda away from the Northern corridor in favour of the Central corridor.  Uganda ships an estimated 10 million tons of cargo a year.
Now that Uganda has changed her mind, Tanzania has to re-think its investment on SGR urgently. If Rwanda, favors the Northern corridor, Tanzania will be alone in the project given the economic and Political turmoil in Burundi.
Tanzania, given the current uncertainties, is free to change its mind about where to invest the US$7.6 billion slated for investment in the Central corridor. She should abandon the extension of the line beyond Isaka to Keza and Musongati. The 413 km of Greenfield Railway will be a wasted investment. At the current rate of US$5 million per kilometer, Tanzania will waste US$ 2.075 billion dollars.
Instead, this money should be spent on the proposed Dar-es-salaam Mtwara line.  Mtwara, which is rich in Coal and Iron ore deposits, is roughly 556 Km from Dar-Es-salaam. At the current rates, this line will cost US$2.78 billion to open Mtwara‘s mines for exploitation and transport the coal inland to cement manufacturers and other users upcountry.
The DIKKM feasibility study ignored the domestic freight focusing only at exports and imports.  But the coal mines and cement manufacturers in the Mtwara region could supply enough tonnage to sustain the Railway line.
Despite spirits effort by Magufuli(R) Museveni (L)
 chose the Kenya loop
Further, a railway line has direct economic links with the local economies of the areas it traverses, opening them to exploitation, thus spurring unforeseen economic activity.
The Central Corridor will traverse several high potential towns to wit: Morogoro, Kilosa, Dodoma, Manyoni, Tabora, Isaka and Shinyanga. Extending the line to Mtwara will raise the number of major towns served by the line to eight from the current seven.
These towns are expected to grow rapidly as economic zones in the short run due to ease of transport.  A number of new sectors will sprout in addition to agriculture and mining. These include; tourism and related services, distribution, building and construction. This growth will spur economic activity within the cities and their hinterlands that would feed on the railway line.
Demand for transport services will also escalate and, given the state of roads in Tanzania, the bulk of this demand will be met by the railway line which is safer and faster compared to road transport. The result is: Tanzania will end up generating more internal passenger and freight traffic than anticipated. Such potential should be meticulously natured.
The greatest bottleneck in Tanzania especially, for agricultural produce and other sectors, is transport and power supply. This means that both enabling infrastructure categories must be developed simultaneously in order to spur growth.
One other potential that was down-played in the feasibility study is passenger traffic. Experience in Kenya shows that passenger traffic can generate significant revenue. The Nairobi- Mombasa section has generated great interest in passenger travel because of speed and cost and is running four trains per day only five months after launch.
In Tanzania, given its vast territory, the demand for passenger trains is higher than in Kenya. The high-speed trains could soon become a major incentive for passenger travel and generate significant revenues.
The drudgery of travel is the greatest disincentive for travel. High-speed travel in a reliable and safe mode will spur domestic tourism in Tanzania.

 The Central Corridor is the longest rail route in one country in East Africa. It also has the largest potential to spur well-distributed economic activity in the country which, in turn, will generate higher demand for its services.