Uganda eyes Tanzania route for refined petroleum products

Uganda is in advanced negotiations with Tanzania to develop a pipeline for transporting refined petroleum products, a move government officials say will strengthen the regional energy security and reduce reliance on existing import routes.

 The talks follow a meeting between President Museveni and Tanzanian President Samia Suluhu Hassan on Saturday, February 7, 2026, during which the two leaders agreed to fast-track plans for a pipeline linking Uganda to Tanzania’s port of Tanga.

 ”Today in Dar es Salaam, I held fruitful bilateral talks with Samia Suluhu Hassan. We agreed to deepen Uganda–Tanzania cooperation in energy, trade, infrastructure and regional peace,” President Museveni wrote on social media platform X.

 “We reviewed progress on key projects, including the EACOP, which is on course, as well as plans for gas and refined oil pipelines that will strengthen our shared energy security and position Tanzania as a key export corridor for Uganda,” he added.

 The proposed infrastructure would enable Uganda to export refined petroleum products while also allowing for the importation of fuel during the interim period before completion of the country’s planned $4 billion refinery.

 Officials familiar with the project said feasibility studies are nearing completion, with implementation expected to begin within six months, subject to final approvals.

The pipeline is expected to complement the ongoing construction of the 1,443-kilometre East African Crude Oil Pipeline (EACOP), which will transport crude oil from Uganda’s Lake Albert oilfields to Tanzania’s coast.

 The proposed pipeline is expected to operate as a two-way system, allowing Uganda to import refined petroleum products from Tanzania before its refinery becomes operational, and later export processed fuels through Tanga once domestic refining capacity is in place.

 Currently, Uganda relies on the Kenya Pipeline Company (KPC) for about 90 per cent of its refined petroleum product imports. Uganda is KPC’s largest and most critical market, contributing an estimated 35 per cent of the company’s annual revenue and about 95 per cent of its foreign exchange earnings.

 Through the Uganda National Oil Company (UNOC), Uganda secures fuel imports via Kenya’s port of Mombasa and transports them through the KPC pipeline to Eldoret. In the first year of the arrangement, Uganda paid KPC more than $80 million in pipeline fees.

 However, recent developments in Kenya’s energy sector have raised questions about the long-term cost and reliability of the route. The Kenyan government recently announced plans to partially privatise KPC through an Initial Public Offering (IPO), in which it intends to sell 65 per cent of the company on the Nairobi Securities Exchange.

 Under the proposed share allocation, 20 per cent will go to local retail investors, 20 per cent to local institutional investors, 20 percent to East African Community investors, 15 per cent to oil marketing companies and five per cent to KPC employees, with the Kenyan government retaining 35 percent ownership.

 Analysts note that East African Community investors collectively account for about 13 per cent of the total offering, meaning individual countries such as Uganda may only be able to acquire a small stake, depending on subscription levels across the region.

 Industry analysts have raised concerns about the structure of the IPO, noting that KPC is a tariff-regulated, throughput-driven business with heavy capital expenditure requirements. According to market analysts, the offer values the company at about $1.27 billion, translating into a multiple of about 8.1 times enterprise value to earnings before interest, tax, depreciation and amortisation (EBITDA).

 They add that the projected dividend yield of about 3.9 per cent is relatively low and conditional, while the company faces significant capital expenditure needs estimated at $900 million through 2030. The IPO proceeds, they note, are expected to go to the Kenyan government rather than directly into KPC’s infrastructure upgrades.

 Analysts warn that future infrastructure investments could be funded through higher pipeline tariffs, which would increase fuel transportation costs for landlocked countries such as Uganda and potentially raise pump prices across the region.

 Ugandan officials say the proposed Tanzania pipeline is part of a broader strategy to diversify energy supply routes, reduce exposure to single transit corridors and enhance regional cooperation.

 If implemented, the pipeline would position Tanzania as a key export corridor for Uganda’s refined petroleum products while providing an alternative import route during the refinery construction phase.

 Government sources said discussions are ongoing, with technical, commercial and regulatory aspects still under review before a final investment decision is taken.

 The project, if approved, would mark another major milestone in regional energy integration, alongside EACOP and planned refinery developments in the Albertine Graben