KAMPALA —Uganda’s planned $5 billion East Africa Crude Oil Pipeline (EACOP) could be delayed further after another prospective funder, Standard Chartered Plc, withdrew from funding the project, flagging it as an environmental risk.
The construction of EACOP, the world’s longest heated crude oil pipeline proposed by French Oil Company Total and the China National Offshore Oil Corporation (CNOOC) has already been delayed by the complexities and grievances regarding environmental concerns
A spokesman for the London-based bank is quoted by Bloomberg last week as saying that Standard Chartered “isn’t involved in the financing” of the East Africa Crude Oil Pipeline project, which is planned to carry oil 900 miles from the fields of western Uganda to the coast of Tanzania.
Activists have always warned they’ll target banks and investors involved in supporting the project.
The withdrawal by risk-averse lenders from the East African Crude Oil Pipeline has seen the cost of the project rise by 30 percent to $5 billion, meaning shareholders will be forced to dig deeper into their coffers to fund it.
Shareholders of TotalEnergies raised this question during the annual general meeting in May 2022, and company executives confirmed that increase in cost to $5 billion for a fully completed project, of which $2 billion will be financed through shareholders’ equity and $3 billion by external funding.
The shareholders of the Eacop, also known as the Hoima-Tanga oil pipeline, are TotalEnergies (62 percent), Uganda National Oil Company (15 percent), Tanzania Petroleum Development Company or TPDC (15 percent), and China National Offshore Oil Corporation (8 percent).
At least 10 banks have flagged Eacop as an environmental risk, expected to produce emissions of about 34 tonnes of carbon dioxide at peak production annually, hence not in line with their principle not to lend to projects that do not meet the Paris Agreement goals on climate change.
Last year, the project plummeted into trouble after global insurers and export credit agencies, including French multinational AXA, withdrew their support.
“The underlying project is not compatible with our climate commitments,” AXA wrote in July 2022, while the UK Export Finance also turned down an application for finance, after the UK government ceased financing fossil fuel projects overseas.
The lenders also see Eacop as a project that is fraught with investment risk given the oil price fluctuation while international markets where the oil is to be exported are also embracing clean energy.
President Yoweri Museveni late last year maintained that the project would go ahead despite criticism from environmentalists