Uganda is sticking to its ambitious target of completing a large section of its “oil roads” in the Albertine Grabben region.
The set target of 2021 is a year behind schedule, and officials are citing funding challenges.
According to a 2016 Cabinet directive to the Uganda National Roads Authority (Unra), the 12 critical oil roads, about 700km in total, were supposed to be completed by 2020 to facilitate the production of oil in 2023.
At a recent media site visit, officials said some 550km of the roads for which funding has already been secured will be completed by 2021. The roads are necessary to transport heavy equipment for extraction and evacuation of the crude oil.
The government is optimistic that a tax dispute with its three major private players—Tullow Oil, France’s Total E & P and China’s CNOOC—will be resolved to progress towards a final investment decision by the end of the first quarter of next year.
For easy management of the project, the roads were divided into six phases. The government has secured about $534 million in funding from China’s Exim bank for Phase One, Two, Three, and recently Five, whose construction by four Chinese contractors is steadily on going.
However, funding for phases Six and Four still hangs in balance. Whereas Phase Four is at contract awarding stage, the government has still failed to find a funder for the final section, Phase Six, of the road.
Even with a secured loan, the money isn’t readily available due to the process of acquiring the funding.
The government requires contractors who bid to offer 30 per cent pre-financing of the roads for 12 months as it negotiates the loans.
To advance the work, the government is now lowering in its requirement to 15 per cent of funding as it expects Exim Bank to provide 85 per cent of the total funding.
“Pre-financing has been good for the project because, with it, contractors hit the road running and it gives the government slightly more time to negotiate the loans,” Davis Muhweezi the Unra transport economics team leader said during the media site visit.
Unra opted to begin construction at bottlenecks such as escarpments, bridges, swamps and sharp corners to allow oil companies to transport their equipment while construction is going on.
According to Unra acting executive director Christopher Manyindo, it is unlikely that they will meet the earlier set deadline of 2020.
Initially the government was eyeing UKAid to finance the final package, but the loan request has already been rejected twice by the European donors over the high cost of the roads.
Parliament had also questioned the high cost and legislators recently visited the area to view the cost drivers before approving more loans for the project.
According to Mr Muhweezi, the cost per kilometre is between $1 million and $1.5 million. The usual cost per km is about $1 million.
The roads expect to have traffic of over 500 heavy vehicles per day, so they need to be thicker than normal.