Industry Trend Analysis - Quick View: Total Consolidates In East Africa - DEC 2017

The Latest: The acquisition of Maersk Oil & Gas by Total in August will not affect the French major's decision to move ahead with the Hoima-Tanga crude export pipeline project in East Africa. Concerns were raised following the transaction, due to the acquisition of several assets in Northern Kenya, fuelling speculation that previously proposed routes for export through Kenya may be re-examined. The company's consolidated position in East Africa could see development costs brought down, if operational and strategic efficiencies can align.

Implications: Whilst the pipeline is set to progress in its current form, from Hoima in Uganda's Lake Albert Basin, to Tanga on the Tanzanian coast, there is an increased likelihood for a joint development or shared transportation plan for Total's expanded asset portfolio in Northern Kenya. Separate pipelines, from Hoima-Tanga and Lokichar-Lamu, will raise overall project costs and will demand a higher discovered resource base to be viable economically (see 'Upstream Momentum Despite Headwinds Over Ground', July 28 2016). Total's consolidated position in East Africa, with assets in both Uganda and Kenya, would now suggest that some form of joint development for the separate resource bases is possible, saving the overall cost of developing the two plays. This may be through an aforementioned combination of transportation options or simply through shared operational efficiencies in the region.

What ' s Next: Total will continue to forge ahead with the planned USD3.5bn heated pipeline which is set to unlock the substantial reserve base in Uganda (see ' Kenya, Uganda Set For Major Production Growth ' , April 7); a FID for the project is expected in early 2018. We note risks to the pipeline project, and subsequently the monetisation of oil in both Uganda and Kenya, remain stacked to the downside. The construction will be technically challenging and associated infrastructure build-outs at the coastal export ports will be required.

Uganda- Tanzania The Preferred Route
East Africa Oil Portfolio

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