Uganda and Tanzania signed an agreement Thursday in Dar es Salaam to develop a regional energy hub at Tanzania's Port of Tanga that could attract more than $20 billion in private investment and establish one of Sub-Saharan Africa's largest integrated petroleum facilities. The memorandum of understanding between the Uganda National Oil Company, the Tanzania Petroleum Development Corporation and Vitol Bahrain EC was witnessed by Presidents Yoweri Museveni and Samia Suluhu Hassan.
The deal marks a significant expansion of market-driven energy infrastructure in East Africa, building on the $5 billion East African Crude Oil Pipeline that's nearing completion. It demonstrates how neighboring countries can leverage private capital and existing infrastructure to create regional value chains without relying on multilateral development schemes.
Refinery and Pipeline Infrastructure
The centerpiece of the Tanga hub is a proposed refinery designed to process crude from regional and international markets. Tanzania Petroleum Development Corporation Managing Director Mussa Makame said the facility would complement Uganda's planned 60,000-barrel-per-day Hoima refinery. Both projects will be linked through a bi-directional pipeline capable of transporting refined petroleum products according to market demand.
Uganda's production at its Kingfisher development is expected to begin in a few weeks' time, making the country an oil producer for the first time. The infrastructure package includes a refined petroleum products pipeline between Uganda and Tanzania, expanded storage and distribution facilities, and a proposed natural gas pipeline connecting the two countries. Rather than simply exporting crude oil, Uganda aims to maximize value through downstream industries that create employment and support manufacturing.
Uganda's Energy Minister, Dr. Monica Musenero, emphasized the economic development potential. "These are not merely infrastructure projects," she said. "They are strategic investments that will create jobs for our young people, deepen regional trade and strengthen the logistics systems that support our economies."
Regional Competition and Market Dynamics
The Tanga project could signal competition with Kenya after Nigerian tycoon Aliko Dangote initially proposed Tanga for his refinery on Africa's east coast but later switched to Lamu in Kenya. The change followed a public rebuke by Tanzanian President Samia to Kenyan counterpart William Ruto, who had announced Tanga as the Dangote refinery site without consulting Dodoma. Officials are now avoiding suggestions of regional rivalry while acknowledging both sites have important roles in improving energy security.
Tanzania's Energy Minister, Deo Ndejembi, described the memorandum as the next phase of the Uganda-Tanzania energy partnership established through Eacop. He said the focus is shifting from transporting crude to refining, storage, logistics and industrial development. The Tanga Regional Energy Hub has the potential to become one of the largest integrated energy infrastructure developments in Sub-Saharan Africa, he said, strengthening East Africa's energy security and export capacity.
The proposed bidirectional pipeline will allow refined products to move in either direction depending on demand, opening wider regional markets while reinforcing supply security. Feasibility and front-end engineering design studies for the refined products pipeline and storage terminal are expected to be completed later this year. Studies for the proposed Uganda-Tanzania natural gas pipeline are scheduled for completion by October.
Power Integration and World Bank Financing
Beyond petroleum, Dr. Musenero said Uganda had secured $250 million from the World Bank to finance its section of the planned Uganda-Tanzania 400kV electricity interconnector. The project is expected to strengthen regional power trade through the Eastern Africa Power Pool and improve electricity exchanges with Southern Africa.
She said the Hoima refinery and the proposed Tanga hub are complementary projects designed to improve regional energy security and enable East Africa to capture greater value from its petroleum resources. The new partnership builds on the 1,443-kilometre Eacop, which is nearing completion and has become the flagship cross-border energy project linking Uganda's oilfields to Tanzania's Indian Ocean coast. Officials said the experience gained from delivering the project has strengthened investor confidence.
Why This Matters:
The Tanga energy hub represents a market-oriented approach to regional development that prioritizes private investment over state-led initiatives. With more than $20 billion in potential capital flowing into refining, storage and distribution infrastructure, Uganda and Tanzania are positioning themselves to capture downstream petroleum value rather than simply exporting raw crude. The bi-directional pipeline design reflects commercial flexibility, allowing refined products to flow based on market demand rather than rigid government planning. Uganda's transition from oil importer to producer, combined with its $250 million World Bank commitment to electricity interconnection, demonstrates how energy infrastructure can drive industrialization and trade integration. The project's success will depend on maintaining investor confidence through predictable regulatory frameworks and protecting property rights, while competition with Kenya's Lamu site could improve efficiency and lower costs across the region.