INTERVIEW-Uganda says oil revenue possible alternative to Chinese cash for
railway
Tue Oct 21, 2014 10:06am GMT
* Museveni says railway will happen "China or no China"
* Uganda has started talks with China on financing
* But future oil revenues could be used instead
By Karin Strohecker
LONDON, Oct 21 (Reuters) - Uganda could rely on income from future oil
exports to finance an $8 billion railway if funding talks with China fail to
bear fruit, its president said.
Yoweri Museveni confirmed that Uganda had started negotiations with China on
building the line that would link to Kenya, speeding up freight transport in
the region. He gave no details about how far the talks had progressed.
"But if they don't (offer financing), we shall fund it ourselves," Museveni
told Reuters on Monday on the sidelines of an African investment conference
in London.
"Remember we have our oil, which we shall start harvesting in 2017, and that
money will deal with these projects - railway and electricity ... China or
no China, we shall build that railway."
The new line would run from the Kenyan border to Kampala, then north to
South Sudan and west to the oil fields. It would supersede a narrow gauge
line that now only operates to Kampala. The existing line, on which trains
travel more slowly, has suffered from years of neglect. Most freight in
Uganda goes by road.
Uganda believes that getting finance from China, which is helping build
Kenya's new railway, would be cheaper than tapping international markets.
Uganda found commercial oil reserves in 2006 but production start dates have
repeatedly been pushed back, partly because of disagreements with oil firms
over whether to refine the crude in Uganda and partly due to the challenge
of exporting from the landlocked nation.
Uganda was deemed to have commercially viable quantities of oil when
recoverable reserves reached a threshold of 800 million barrels, a Ugandan
official said. That figure has now reached 1.4 billion barrels and the
discovery of oil in Kenya has made building a pipeline across both states
more viable.
Oil prices, which have slipped from more than $110 a barrel in June to well
below $90 a barrel, affect viability though falls can be addressed in
production contract terms that ensure returns for firms are enough to keep
projects going.
Uganda wanted a refinery built with capacity to process 120,000 barrels per
day (bpd), a plan oil firms said was not commercially viable. Both sides
have since agreed to a refinery with initial capacity of 30,000 bpd, rising
to 60,000 bpd later.
Uganda has signed up to a proposal with Kenya to build a pipeline running to
a planned oil terminal on the northern Kenyan coast.
Separately, the president shrugged off concerns about the Somali militant
group al Shabaab, after it vowed more attacks on countries such as Uganda
which contribute troops to an African peacekeeping force in Somalia.
"Al Shabaab is not a danger to Uganda because it can't take root in Uganda,"
he said. "They are not supported by the population."
"They are just a threat if they are not attended to," he said.
The al Qaeda-aligned group, which promised more attacks after U.S. missiles
killed its leader in September, bombed sports bars in Kampala in 2010,
killing 74 people. Last year, the group launched a deadly attack on a
shopping mall in Kenya, another contributor to the African peacekeeping
force. (Editing by Edmund Blair and Robin Pomeroy)