Museveni orders Tamoil investigated
Richard
Doubts have been raised again over the ownership of the firm that won
the contract to lay the Kenya-Uganda oil pipeline and its ability to
complete the job. DANIEL K. KALINAKI reports
The planned signing of the $100 million Eldoret-Kampala pipeline
contract between the Kenya and Uganda governments and Tamoil East
Africa Ltd on Monday this week hangs in the balance after President
Yoweri Museveni ordered that the firm be investigated.
Initially, the contract was to be signed on October 10, but this was
postponed after the project's Joint Co-ordinating Commission - which
is co-chaired by the Permanent Secretaries for Energy in Kenya and
Uganda, Patrick Nyoike and Fred Kabagambe-Kaliisa respectively,
questioned Tamoil's bona fides.
The signing was then postponed to October 30, pending satisfactory
answers to queries about its true ownership after it emerged that it
was being bought by another holding company, Oilinvest.
Other queries centred on its financial position after it emerged that
it had never made a profit, had submitted unaudited accounts and that
its share capital was one million euros, not one billion as had been
suggested by a senior company executive.
In ordering one of his advisers to investigate the true status of
Tamoil, which won the coveted contract under controversial
circumstances after a major oil consortium - Petronet - challenged
the evaluation of both the technical and financial bids, President
Museveni has cast doubt on the entire exercise.
"There were some disputes and some accounts; Tamoil did not have proper
audited accounts," a State House source told The EastAfrican. "So the
president asked his people to look at the company, the Ministry [of
Energy and Mineral Development] and the Joint Co-ordinating Commission
(JCC) to see how they approached the entire process.
It is understood that the adviser - name withheld - has already met
officials from the Energy Ministry, the JCC and Tamoil, and is expected
to produce a report as early as this week.
Speaking to The EastAfrican, a top Tamoil executive asked for questions
in writing, but insisted that everything the firm had done so far was
above board. He said the firm was capable of building the pipeline.
At the time of going to the press, he was yet to respond to the
queries.
Although signing of the pipeline deal was scheduled for Monday this
week in Kampala, sources close to the JCC say it is highly unlikely
before the investigation ordered by President Museveni is concluded and
the government gives a go-ahead.
"We need clearance from the Cabinet," a government official close to
the JCC said, "and we have not received that yet."
The investigation is the latest in a series of setbacks that have
dogged the project to extend the Mombasa-Eldoret oil pipeline to
Kampala in order to reduce the cost of transporting oil products to
Uganda and other downstream countries like Rwanda and Burundi.
It also comes after senior Tamoil officials, including its chairman,
Hajji Habib Kagimu, and its representative in Kenya, Joshua Omino
Ogola, jetted into the country to put out the flames that threatened to
engulf the project after the signing ceremony was postponed.
Ministry officials say that following the queries by the JCC, Tamoil
officials produced a guarantee for the project from Oilinvest, the
Libyan-owned Netherlands-based investment firm that is taking over
Tamoil Holdings Ltd.
In an October 18 letter to the JCC, company officials revealed that the
Libyan Arab Investment Portfolio, a new Libyan investment vehicle set
up early this year and based in Tripoli, had agreed to lend them up to
$100 million for the project. The company officials also presented a
financial model and a financial plan for the project, after earlier
ones were rejected.
In a letter to Tamoil, Mr Kabagambe-Kaliisa has asked the firm for an
assurance that once the agreement is signed, the money will be
transferred to a bank in East Africa for implementation of the project.
In response, Tamoil officials said it was not necessary to transfer the
money as they had agreed a $1m guarantee with Stanbic Bank in Kampala.
Tamoil's letter to the JCC, however, does not address some of the
queries raised by Alain Rosier, an official from the project
consultants, Nexant, which he urged should be resolved before the deal
is signed.
Among other things, Mr Rosier said Tamoil should provide more details
about the mechanism for paying of government shares in kind and the
government's share in the Capex (capital expenditure). He also noted
that Tamoil had supplied contradictory information in the breakdown of
its Capex and also raised issues with the pre-development costs
outlined by the company as well as the project contractual structure.
The State House investigation is the latest in a series of twists and
turns that have followed the pipeline project since it was tendered
out.
Designed as a model for cross-border infrastructure projects, the
Kenya-Uganda Oil Pipeline Extension Project quickly ran into
controversy at the pre-qualification stage after one of the bidders,
Petronet, a consortium involving Kenyan, Ugandan and South African
firms, accused the JCC of bias in throwing out its bid.
Petronet appealed to the Kenyan and Ugandan legal systems, but
discovered that neither had jurisdiction over the JCC, a super-normal
creation of the two governments. This meant that while the JCC's
independence was emphasised, the allegations raised by Petronet were
not heard.
A spanner was also thrown into the works when Uganda's junior Energy
Minister, Simon D'Ujanga, told The EastAfrican that Uganda, which will
own 49 per cent of the project jointly with Kenya, was planning to cede
more of its stake to a private company, probably Tamoil.
Mr D'Ujanga argued that Uganda was not interested in owning the
facility. He also communicated that position to a parliamentary
committee on energy.
Mr Kabagambe-Kaliisa later wrote to his counterpart, Mr Nyoike, denying
the statement. Another ministry official described it as "the
utterances of a freshly-appointed but not-wholly informed minister,"
but the shambles demonstrated the lack of coherence in government
policy over the pipeline.
According to the original plan, the project is to be undertaken on a
"build, operate and transfer" or BoT basis - an arrangement whereby
Tamoil East Africa will build and operate the project for 20 years
after which it will transfer ownership to the public sector.