China in East African pipeline wars

An intense geopolitical battle is simmering in East Africa over cross-border infrastructure. In this two-part analysis, Wits China Africa Reporting Project’s Bob Wekesa traces the genesis of the intra-East-African strife, touching on the interests of China and other external players.

Since the mid-2000s, East Africa’s status as mineral resources supplier has witnessed a rapid rise. As a result, the politics of resource exploitation in the region is equally on an upswing. Within the region, fluid resource-cum-infrastructure-motivated alliances have been formed and suspended with dizzying frequency. Competition and cooperation for the exploitation of oil transportation is a fascinating case in point. The building of an oil pipeline form Western Uganda to the East African coast has seen both cooperation and feuding between Kenya, Tanzania, Uganda, Rwanda, South Sudan, and Burundi – against each other or in partnership with one another. External actors, key among them China, France, Japan and the US have been drawn into the intra-East Africa oil pipeline geopolitical intrigue, both overtly and covertly.

How is East Africa’s newfound oil wealth and specifically the construction of an oil pipeline influencing the contours of East African geopolitics? What is the role of China and other global players in the unfolding competition-cum-cooperation between the East African Community (EAC) member states?

To answer these questions, a brief background summary is necessary.

Three presidents

After a spate of successful prospecting, Kenya and Uganda have in recent times racked up decent oil properties. Exploration first bore fruit in the Lake Albert Region in western Uganda in 2006 and currently Uganda is estimated to hold 6.5 billion barrels. In 2012, Kenya too announced the discovery of oil in the northwestern region of Turkana.

Concomitant with the heady announcements of huge reserves of oil in Kenya was a political transition that saw Uhuru Kenyatta become Kenya’s fourth president in March 2013. One of Kenyatta’s first state visits out of Africa was to China. In Africa Kenyatta early on visited Uganda where he and his host Yoweri Museveni were joined by Rwandan President Paul Kagame. One of the rubrics of that meeting was an agreement to revamp and extend the existing Kenyan refined oil pipeline from the coastal city of Mombasa to Kampala and on to Rwanda. The three presidents also agreed to develop another pipeline targeting transportation of crude oil in the reverse direction from the Western Uganda oilfields with a link to South Sudan to the Kenyan coast. It is this latter pipeline rather than the former one that has recently triggered off intense geopolitical competition in the region.

The willing and the unwilling

Crucially, the initial June 2013 meeting forged close ties between Kenyatta, Museveni and Kagame with South Sudan’s Salva Kiir being coopted into a geo-polity that soon acquired the sobriquet, “Coalition of the willing”. Why “coalition of the willing”? This was the media-promoted phraseology distinguishing Kenya, Uganda, Rwanda and South Sudan from Tanzania under (now retired) President Jakaya Kikwete, and Burundi led by President Pierre Nkurunziza. The latter two nations had effectively been shunted from the formation notwithstanding their being member states of the EAC. The factors underpinning the formation of the “coalition of the willing” pitted against the “coalition of the unwilling” (Tanzania and Burundi) revealed regional turf wars and emanated from historical and ongoing political and economic leitmotifs.

Corridors

Forging ahead, Kenya, Rwanda and Uganda (and to a lesser extent South Sudan) at a summit in Uganda in February 2014 mooted a mechanism for frequent summits initially dubbed “infrastructure” and “integration” projects and ultimately christened the Northern Corridor Integration Project (NCIP). The “Northern Corridor” in East African infrastructure parlance refers to the proposed series of transport infrastructure from the northern parts of the Kenyan coast through northern Kenya, into Ethiopia, Uganda and South Sudan. The Northern Corridor is distinguished from the Central Corridor which begins at the port of Mombasa, going through Nairobi and on to Uganda, Rwanda and Burundi. The Southern Corridor begins from the Tanzanian ports of Tanga, Bagamoyo and Dar es Salaam and on to Uganda, Rwanda and Burundi.

In essence focus on the Northern Corridor would benefit Kenya in that its less developed northern regions would get infrastructure development but this would be detrimental to Tanzania, home to large swathes of the Southern Corridor. Indeed, Kenya had long strategized the development of its marginalized, semi-arid and insecurity-prone northern peripheries through a long term plan entitled Lamu Port South Sudan-Ethiopia Transport (LAPSSET), much of which was adopted and adapted for the NCIP initiative.

What role China?

At a May 2014 presidential summit in Nairobi, the NCIP took shape when it was agreed that the starting point of the crude pipeline would be at Hoima in Western Uganda, and would proceed via Lokichar in the Kenyan oilfields, and terminate at the new port of Lamu on the Kenyan coast. A subsidiary pipeline from South Sudan would join this main pipeline at Lamu. Impetus for the initiative was gained when Chinese Premier Li Keqiang visited Nairobi in May 2014 and held a multilateral meeting with presidents Kenyatta, Museveni, Kagame and Kiir, pledging support for the intra-region infrastructure projects, ostensibly, the crude oil pipeline included.

Even as the Northern Corridor plan took shape, the Ugandan government and particularly President Museveni was already in discussion with the oil companies active in oil exploration in Uganda, namely the UK’s Tullow Oil, France’s Total and the China National Offshore Oil Corporation (CNOOC). State-owned CNOOC made its move into the Uganda oil sector in February 2012 when CNOOC bought two-thirds of Tullow’s interests in the Ugandan oilfields in a joint venture with France’s Total for a combined total of US$2.9 billion. The deal was such that today, Tullow, Total and CNOOC each hold 33.33% of the shares in the oilfields.

Kenya vs. Tanzania

All seemed set for the construction of the Hoima-Lokichar-Lamu pipeline. In January 2015 evaluations of the companies that would do the construction commenced and in August 2015 Uganda and Kenya reportedly struck a deal for the project and tenders were floated for companies to undertake the work. In September 2015, Kenya and Uganda pledged to establish a company to manage the pipeline. Things changed in October 2015 when Uganda signed a deal with Tanzania for the pipeline to start from Hoima in Western Uganda and to proceed to the port of Tanga in Tanzania (Southern Corridor). In March 2016, Kenya announced that it would go it alone in constructing its section of the Northern Corridor pipeline from the Turkana oilfields to the Lamu port. Around the same time, some form of rapprochement emerged in that Kenya and Uganda were in discussions to revive the Northern Corridor pipeline route. But a couple of days later in April, Uganda announced that it had chosen and signed a final agreement with Tanzania, therefore confirming the Southern Corridor route for the US$4 billion pipeline. Kenya had lost, Tanzania had won. As Tanzania celebrated, Kenya reverted to its earlier mantra of constructing its own pipeline, perhaps with the involvement of South Sudan by way of a pipeline link.

Total machinations

At the heart of the duel was the French oil giant, Total. It would appear that once the Kenyan, Ugandan, Rwandan and South Sudan leaders came up with the broad concept for the transportation of the crude oil to the Kenyan coast, Total weighed in by dint of having a stake in the Ugandan oilfields, in proximity with those of CNOOC and Tullow. Indications of the negotiations that impelled Uganda to dump the Kenyan route for the Tanzanian route can be seen in the “courtship” meetings between Ugandan leaders and officials on the one hand and Total officials on the other. For instance, shortly before the August 2015 announcement of the agreement in favour of the Northern Corridor by Kenya and Uganda, President Museveni had met with Total vice president Jabier Rielo in Kampala. Museveni met again with Patrick Pouyanné, the Total E&P chairman and chief executive officer, in December 2015.

At the same time, Total officials were holding talks with Tanzania, ostensibly including former president Jakaya Kikwete and recently elected President John Magufuli. Another interesting development was the announcement in July 2015 that a Danish Company, Ramboll Associates, which works closely with Total, would undertake a study of the pipeline route. If this study informed the decision by Uganda to choose the southern rather than northern route, then the study would have been done super-fast as the contract was awarded in July 2015 and the initial decision made in October 2015. It is interesting to note too that in the August 2016 deal between Uganda and Kenya, no oil company was reportedly included but in the October deal between Uganda and Tanzania, Total was captured as part of the framework.

In the next installment we will link the oil pipeline saga to wider Chinese interests in East Africa.

Dr Wekesa is a research associate at Wits China Africa Reporting Project and postdoctoral fellow at Wits Journalism and media department.