Tanzania and Uganda have signed an agreement allowing for the construction of a 1,445 kilometres (898 miles) crude oil pipeline.
The $3.5bn project – equivalent to KSh. 379.75 billion, will connect Uganda’s oil fields to Tanzania’s port of Tanga.
The deal was signed by Uganda’s President Yoweri Museveni and Tanzania’s President John Pombe Magufuli in the Tanzanian northern town of Chato.
But according to international media reports, there was no announcement during the ceremony on the project’s start date or on who would finance what is set to become East Africa’s first major oil pipeline.
Oil reserves were found in Uganda in 2006 but production has been delayed partly by a lack of infrastructure including an export pipeline.
French oil giant, Total is leading the plans along with China’s China National Offshore Oil Corporation (CNOOC), and the governments of Uganda and Tanzania.
The ceremony comes days after Total, the majority shareholder in Uganda’s oil fields, said it had reached an agreement on the pipeline with Uganda’s government.
But there are warnings the project could come at a huge cost to some Ugandan communities.
Conservationists have also warned that ecosystems are at risk from the drilling in Uganda’s nature reserves.
Reuters News Agency quoted Tanzanian government spokesman, Hassan Abassi saying about 80 percent of the pipeline will run through Tanzania.
Abassi said the project is expected to create more than 18,000 jobs for Tanzanians.