Will the East African Crude Oil Pipeline finally be completed?

Will the East African Crude Oil Pipeline finally be completed?
Will the East African Crude Oil Pipeline finally be completed?

The development of the East African Crude Oil Pipeline (EACOP) has faced numerous obstacles since its initial proposal in 2013. There was great optimism around Uganda’s connection with Tanzania to export crude from Uganda’s oil fields via the Indian Ocean port of Tanga, Tanzania, but construction was halted due to general opposition © carried out in the project. Many investors were forced to pull out, leading many to wonder if the project would see the light of day. However, EACOP has recently attracted new funding and TotalEnergies remains committed to the development of the pipeline.

The EACOP development aims to connect the Tilenga oil field – operated by TotalEnergies – and Kingfisher – operated by the China National Offshore Oil Corporation (CNOOC) – with the port of Tanga in Tanzania. This would help landlocked Uganda export its crude supplies internationally. Although oil was discovered in Uganda 17 years ago, development of the oil fields has been slow as there is currently no easy way to export its oil. crude oil production. If built, the EACOP would be the world’s longest electrically heated crude oil pipeline, measuring 1,443 km.

Until recently, EACOP had $2 billion in financing from oil companies developing the project but required an additional $3 billion to ensure its completion. Several donors have pulled out in recent years due to repeated delays and widespread opposition to the project, mainly on environmental grounds. EACOP shareholders include TotalEnergies, CNOOC, Uganda National Oil Company (UNOC) and Tanzanian Petroleum Development Corporation (TPDC).

Year after year, Total and CNOOC have committed to starting construction of the pipeline and yet no start of construction has taken place. This is largely due to investment uncertainties, with many commercial banks, such as JPMorgan Chase and BNP Paribas, having withdrawn from EACOP financing. More than 20 major insurance companies, such as Aegis, Canopius and Britam, have also said they will not get involved in the project. This left the Industrial and Commercial Bank of China (ICBC) and Standard Bank’s Ugandan subsidiary, Stanbic, with the task of seeking new investors to ensure the EACOP is realized after more of a decade of planning.

This month, South Africa’s Standard Bank announced it would provide $5 billion in financing for the development of the EACOP. This came as a surprise to many given the long list of banks refusing to get involved in the project after the European Parliament passed a resolution opposing the project in 2022. Nonetheless, the governments of Uganda and Tanzania hope to complete the project by December 2025.

Standard Bank Chairman Nonkululeko Nyembezi said: “We have completed our internal governance process and environmental and social risk assessment, which has been a milestone. “Nyembezi added: “We have all the lenders. There is total commitment from the promoters of the oil projects to carry them out.

TotalEnergies, which holds the majority of shares in EACOP, claims to act in a transparent manner and hopes to complete the EACOP project with the support of both countries. The Lake Albert region of Uganda has more than a billion barrels of crude oil reserves, which the Ugandan government wants to exploit through the Tilenga and Kingfisher production projects. Total recognizes that the Tilenga and EACOP projects are in a “sensitive social and environmental context and require land acquisition programs with careful attention to the rights of affected communities.” The French oil giant believes it can develop the EACOP for the export of Ugandan crude in a considered manner.

However, many environmentalists and citizens of Uganda and Tanzania continue to oppose EACOP. Activists warn that the development of EACOP will devastate the livelihoods of thousands of people in Uganda and worsen the global climate crisis. Human Rights Watch (HRW) points out that once completed, the EACOP will include dozens of drilling sites, hundreds of kilometers of pipelines, camps and other infrastructure, as well as a 1,443 kilometer pipeline. tres, which will destroy vast areas of land and displace more than 100,000 people. Although TotalEnergies has offered compensation to those displaced by the project, a recent HRW report suggests that “the project has suffered from years of delays in paying compensation and insufficient compensation.

The planned route of the EACOP includes sensitive ecosystems, including protected areas and wetlands of international importance, posing threats to biodiversity and ecosystems mes on which local communities depend for their livelihoods, according to HRW. Moreover, after several years of delays, many environmentalists are worried about seeing such a huge project on fossil fuels start now, which would go against international climate goals.

After more than a decade of delays and controversy, TotalEnergies has finally attracted the funding needed to undertake its major EACOP project, with support from the governments of Uganda and Tanzania. However, there continues to be widespread local and international opposition to the project, with serious concerns over the displacement of tens of thousands of people, environmental degradation and greenhouse gas emissions associated with the project. These challenges will not make achieving the EACOP easy, even with massive new investment from South Africa’s Standard Bank.

Par Felicity Bradstock pour Oilprice.com

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