The Tanzanian government is studying the possibility of developing an oil trading hub in the northern port city of Tanga near the border with Kenya to supply fuel to East and Central Africa.

Industry, Trade and Investments Minister Charles Mwijage says the Tanga region has great potential of becoming a major oil trading hub in East Africa in view of its strategic geographical positioning with a deep sea port, ample area for construction of big storage tanks and railway connection.

"Tanga should be an oil trading hub. The most ideal place in East African region is Tanga. We have a big opportunity for oil trading," he said during the inauguration of a second kiln at the Tanga Cement Company on Tuesday.

The minister said construction of an oil trading hub in Tanga would help cut freight charges for oil transportation from the source market as large crude carriers would be able to anchor and carry out ship-to-ship transfer of oil products to other tankers or to transfer storage tanks on land.

"We can create a conducive environment for ship-to-ship (STS) transfer. The region has 25 metres draft and there is enough area for construction of tanks for white products of up to 100,000 tonnes ... Tanga has no congestion of tanks and it is connected by a railway network," he said.

The envisaged facility would lower prices for oil products and hence attract markets in the East and Central African region, including the Democratic Republic of Congo (DRC), Burundi and Rwanda as well as other neighbouring countries, he said.

The government said last month that there are plans to construct a crude oil pipeline from Uganda to Tanga in 2020 at an estimated cost of 3.5 billion US dollars. Uganda has chosen Tanga as the port for the export of its crude oil, rather than Lamu in Kenya after a report found that it was a cheaper and more secure option than Kenya.

The Uganda government said a pipeline between Kabaale in Hoima District and Tanga, of about 1,400 kilomegres, would be the most cost-effective route when Uganda begins exporting oil by 2020.

Picking a route is vital for oil firms to make final investment decisions on developing reserves found in Uganda and Kenya, which are among a string of hydrocarbon finds on Africa's eastern seaboard.

Tanzania has found natural gas offshore. The government said three oil firms operating in Uganda -- London-listed Tullow Oil, France's Total and China's CNOOC -- have all agreed to participate in the construction of the pipeline, with work scheduled to start in mid-2017.