Eacop’s $5bn funding headache as environmental campaigners increase pressure

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By JULES BARIGABA

In a week when seven other financiers have publicly distanced themselves from their support for the East African Crude Oil Pipeline (Eacop), Ugandan government and oil company leaders have remained convinced that the financial package for the project – which is essential to the marketing of Ugandan oil – is on the home stretch and will be tied up in two months.

Confidence is boosted by recent revelations from the FinancialTimes and the Bureau of Investigative Journalism that New York-based insurance broker Marsh McLennan will come on board as insurance arranger. It brought optimism after global insurers Swiss Re, AXA and Zurich last year refused to cover the $5 billion pipeline which has faced fierce campaigning from climate activists and the environment who qualify it as “toxic”.

In March, reports showed that Eacop’s promoters, TotalEnergies, were banking on European and Asian export credit agencies to provide financial guarantee for the project to bring in commercial banks to provide loans.

Officials in Kampala are on guard over the involvement of the financiers but say the cogs are starting to turn.

Negative campaigns

Eacop Deputy Managing Director John Bosco Habumugisha said potential lenders had traveled to Uganda and Tanzania to appraise the project, and the authorities would announce the lenders within two months.

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“What I can say is that we have very many entities that are ready to fund the project,” he said on May 19 while giving an update on the execution of Eacop in Kampala.

Insiders say arranging Eacop’s funding has been a ‘headache’, a ‘slow and complex process’ due to environmental concerns and negative campaigning by climate activists.

“It’s been tough,” a source said.

“Every time something is said or written about this project, a financier drops out.”

The project’s financial advisers are Standard Bank of South Africa via its Ugandan subsidiary Stanbic, the Chinese giant Industrial and Commercial Bank of China (which holds 40% of the capital of Standard Bank) and the Japanese Sumitomo Mitsui Banking Corporation.

A fortnight ago, climate activist Dominika Lasota confronted French President Emmanuel Macron in Brussels, asking him to denounce Eacop, cut off all support and halt the project in which French major TotalEnergies has a 62% stake. %.

Such campaigns have seen major lenders walk out of business as the push for clean energy sources gains traction.

“Total and its allies were in a hurry to announce their final investment decision at the beginning of February this year. Since then, the list of banks and insurers that stay away from Eacop continues to grow,” said said Omar Elmawi, coordinator of the #StopEacop coalition last week.

Just last week, five banks – 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 withdrew.

Thirteen other banks – including two traditional lenders to TotalEnergies – abandoned the French giant’s flagship project between 2020 and 2021, but experts say there is a way back for some of these lenders if Total is on track for a low carbon transition.

TotalEnergies said in its 2021 shareholder presentation that for the Lake Albert project, it had set a carbon intensity target of 13 kilograms of carbon dioxide equivalent, per barrel of crude oil produced (13kgCO2/boe). .

Globally, the carbon intensity of crude oil ranges from 10.1 to 72.1 kgCO2/boe, and the French giant’s chief executive, Patrick Pouyanne, said the company is transitioning from fuels to renewables and remains on track to achieve net zero carbon emissions by 2050.

The longest pipeline in the world

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

The pipeline, which will begin construction in the second half of 2022, will generate up to 34 million tonnes of carbon emissions each year, but Mr Habumugisha says campaigners fail to recognize the measures the project’s developers are taking to mitigate the ‘environmental impact.

“We’re introducing intrusion detection technologies, we’ve added leak detection systems, we’ve added general physical surveillance and on top of that,” he said, adding that activists’ campaigns won’t stop. the project.

TotalEnergies and China National Offshore Oil Corporation made the final investment decision in February to invest $10 billion in production and transportation infrastructure to drill, produce and market Ugandan oil.

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