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23 Aug 2021

Julius Barigaba, The EastAfrican (Kenya)

Tanzania & Uganda: Prospective lenders withdraw from East African Crude Oil Pipeline due to environmental & social concerns

"Cost of Hoima-Tanga pipeline hits $5b as risk-averse banks walk away from 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, 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 month, the project also suffered another setback after global insurers and export credit agencies, including French multinational AXA, withdrew its support. “The underlying project is not compatible with our climate commitments,” AXA wrote in July, 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.

Part of the following timelines

Prospective lenders, insurers & export credit agencies withdraw from East African Crude Oil Pipeline due to environmental & social concerns

Uganda & Tanzania: East African Crude Oil Pipeline (EACOP)