Oct 3, 2022

Mawazo Writing Africa

Writing about the main

Eacop’s $5b financing headache as environment activists pile pressure

In a week, as seven more financiers publicly distanced themselves from supporting the East African Crude Oil Pipeline (Eacop), Ugandan government executives and oil companies remained confident that the funding package for the project – which is key to commercializing Uganda’s oil – is on the home stretch and will be bound in two months.

Confidence is boosted by recent revelations from the Financial Times and the Bureau of Investigative Journalism that New The in York-based insurance broker Marsh McLennan will come on board as insurance arranger. That prompted optimism after global insurers Swiss Re, AXA and Zurich last year declined to cover the $5 billion pipeline, which has faced a vehement campaign by climate and environmental activists who they described as “toxic”.

In March, reports showed that TotalEnergies, Eacop’s promoter, was looking to European and Asian export credit agencies to provide a financial guarantee for the project in order to bring commercial banks on board to lend.

Officials in Kampala are clear on which donors are involved but indicate the wheels are starting to turn.

Negative campaigns

The Deputy CEO of Eacop , John Bosco Habumugisha, said potential lenders have traveled to Uganda and Tanzania to assess the project and the authorities will announce the lenders within two months.

“What can I say , is that we have a lot of institutions ready to fund the project,” he said on May 19 when providing an update on Eacop’s implementation in Kampala.

Insiders say that the organization’s funding by Eacop due to environmental concerns and climate activists’ negative campaign was a “headache” and a “slow and complex process”.

“It was difficult,” said a source.

” Every time something is said or written about this project, a financier walks away.”

The project’s financial advisors are Standard Bank of South Africa through its Ugandan subsidiary Stanbic, Chinese giant Industrial and Commercial Bank of China (which owns a 40 percent stake in Standard Bank) and Japan’s Sumitomo Mitsui Banking Corporation.

Two weeks ago, climate activist Dominika Lasota confronted French President Emmanuel Macron in Brussels, demanding he a To be denounced Eacop, stop supporting and stopping the project, in which French major TotalEnergies has a 62 percent stake.

Such campaigns have led to big lenders letting the company down while the pursuit of clean energy sources gains momentum.

“Total and its allies rushed to announce their latest investment decision in early February this year. Since then, the list of banks and insurers staying away from Eacop has grown,” said Omar Elmawi, the coordinator of the #StopEacop Coalition, last week.

Five banks last week alone – Deutsche Bank, Citi , JPMorgan Chase, Wells Fargo and Morgan Stanley – confirmed that they would not fund Eacop. Insurer Beazley Group and Italian export credit agency SACE also pulled out.

Another 13 banks – including two traditional lenders from TotalEnergies – abandoned the project headlined by the French giant between 2020 and 2021, but experts argue that it is a way back for some of these lenders as Total moves towards a low-carbon transition.

TotalEnergies said in its 2021 presentation to shareholders that it is for the Lake Albert Project has set a carbon intensity target of 13 kilograms of carbon dioxide equivalent per barrel of crude oil produced (13 kg CO2/boe).

Globally, the carbon intensity for crude oil ranges from 10.1 to 72.1 kg CO2/boe, and the French giant’s CEO, Patrick Laut Pouyanne, is transitioning the company from fossil fuels to renewable energy and staying on track to achieve net-zero carbon emissions by 2050

The world’s longest pipeline

When completed in 2025, Eacop will be the world’s longest heated pipeline, transporting 216,000 barrels of oil per day from Hoima in the Lake region Albert in Uganda to Tanga port in the Indian Ocean in Tanzania over a distance of 1,443 km.

The pipeline, whose construction will start in the second half of 2022, will save up to 34 million tons of CO2 emissions per year, but Mr. Habumugisha says activists do not acknowledge the measures project promoters are taking to mitigate environmental impacts.

“We’re rolling out intruder detection technologies, we’ve added leak detection systems, we have added general physical surveillance and additional,” he said, adding that activists’ campaigns will not stop the project.

TotalEnergies and China National Offshore Oil Corporation announced the final I Investment decision made to invest $10 billion in manufacturing and transportation infrastructure to drill, produce and market Uganda’s oil.