The True Oil And Gas Narrative

Activists Threaten Uganda’s Hopes For Early Oil and Gas FID

Activists expressed environmental and social impact concerns over several projects

Uganda’s hopes for an early oil and Final Investment Decision (FID) have been fractured following a decision by prospective financers of the East Africa Crude Oil Pipeline (EACOP) to stand down.

At the beginning of the year, government and lead investors thought they would bypass mounting pressure from both local and international activists–who have expressed environmental and social impact concerns over several projects–and reach a final signature in the first quarter.

An FID would have paved way for fast-tracking of critical infrastructure projects, including the oil production in Tilenga at Buliisa, production at Kingfisher oil field, a refinery in Hoima district valued at U$3.5 billion, two central processing facilities as well as the EACOP.

Standard Bank, Japan’s Sumitomo Mitsui Banking Corporation (SMBC), and Industrial and Commercial Bank of China (ICBC) are among the lead financial advisers to the Joint Venture Partners (JVC) Total and CNOOC, with the intention to fund the construction of the would be world’s longest heated oil pipeline.

-The concerns-

The withdrawal came after an international campaign by over 260 civil society organizations around the world who are lobbying international banks to stifle the debt financing of the EACOP. More than a million people signed a global petition against the project last year.

Activists say the project poise “unacceptable” climate harm and threatens water sources and 2,000 square kilometres of protected wildlife habitats crucial to preserving elephants, lions and chimpanzees. Also, the heated line is likely to emit 33 million tones of CO2 a year, according to their calculations. This is more than Uganda and Tanzania’s emissions combined.

Ryan Brightwell, Researcher and Editor at Bank Track, welcomed the statements from Barclays and Credit Suisse and called for other banks such as Crédit Agricole, JPMorgan Chase and Citi – all major financiers of Total – to follow.

“The EACOP is manifestly incompatible with global efforts to reduce our carbon emissions. Banks simply can’t have it both ways – you can’t claim to be serious about climate change and support climate-destroying projects like the East African Crude Oil Pipeline.” said Brightwell.

The campaign is bound to succeed because Banks are growing weary of the “unprecedented public scrutiny for their role in financing the climate crisis, according to David Pred, executive director of NGO Inclusive Development International, one of the campaigners.

“This project is going to destroy our social and environmental fabric,” Dickens Kamugisha, head of Uganda-based Africa Institute for Energy Governance (Afiego), was quoted as saying by Climate Home News.

“Nearly 100% of Ugandans are dependent on nature. If activities that destroy nature [are carried out], you will have destroyed us,” he said.

Total speaks out

Total has maintained that the project will be implemented in strict adherence to all environmental requirements, insisting that it “acts in transparency on social and environmental stakes of the Lake Albert resources development project.”

According to plan, Ten oil well pads are situated in the eco-sensitive Murchison Falls National Park. Total says it is voluntarily restricting its activities in the park to 1% of its area, despite permits covering 10% of the protected area.

It says it will support a 50% increase in the number of rangers, the reintroduction of the the black rhinoceros and the protection of chimpanzees, efforts activists have humored as empty.

Even though the oil will then be channeled through a network of pipes to feeder pipelines, some passing under the river Nile and encroaching on the Bugoma Forest Reserve, contends that an environmental and social impact assessment (ESIA) studies have been conducted and approved by the Ugandan and Tanzanian authorities.

Our good fortune

The government has touted as the project that will unlock East Africa’s future, by rising Foreign Direct Investment for both Uganda and Tanzania by over 60% during the construction phase.

The Ministry has already submitted a proposal to borrow $130 million to fund its 15 percent shareholding equity owned by through the Uganda National Oil Company. Part of the loan will also pay for “historical costs,” which Joint Venture Partners have been footing since 2017 on behalf of the government.

On March 24, State Minister for Finance David Bahati pitched to parliament’s Committee on National Economy, and the Budget committee the urgency of the loan, the shareholding structure of Eacop and its impact on Uganda’s economy. Lawmakers has earlier rejected the request on grounds that there was no evidence that the loan request was conditioned to FID.

However, analysts say the value of Uganda’s oil reserves has already fallen by approximately 70% since 2013, meaning the oil investment has gone to the wire.

“This value is expected to fall even further as the world transitions into a low-carbon economy. Even from the Tanzania Environmental and Social Impact Assessment it estimated that the government will only get $240 million from the project after its construction, which is peanuts compared to the environmental and social implications faced,” ESI said on its website.