The African Development Bank (AfDB) has said it will not fund the East Africa Crude Oil Pipeline (EACOP), as it does not fall within its focus area of renewable energy projects.
The lender, while responding to a petition by a worldwide consortium of civil society organizations, says it will remain committed to financing only projects that promote sustainable development practices on the continent, which rules out the crude oil pipeline.
The multi-billion shilling 1,445-kilometer pipeline from Hoima, Uganda, to the port of Tanga, in Tanzania is a joint project of the two governments.
“The Bank is committed to facilitating the transition to low-carbon and climate-resilient development in African countries across all its operational priority areas, the project is not included in the bank’s lending program,” said AfDB in a statement.
Over 100 civil society organisations (CSOs) last month wrote a joint letter addressed to the AfDB president, Akinwumi Adesina, calling on the bank to reject an approach by Uganda and Tanzania for partial funding support for the joint pipeline project.
They quoted a grant request believed to have been made through the bank's NEPAD IPPF Special Fund which also receives financial contributions from countries like Germany, Canada, Britain, Norway, Denmark and Spain.
According to the CSOs, the EACOP project is 'exceptionally high-risk' due to its potentially damaging environmental, climatic and social impacts.
"We urge the bank not to proceed with financing this project, but to seek opportunities instead to finance genuine renewable infrastructure to help meet the region’s energy needs in a clean and rights-compatible manner in the decades to come," they said.
The CSOs also lodged an online petition against plans by Standard Bank, through its subsidiary Stanbic Uganda, and Japan's Sumitomo Mitsui Banking Corporation (SMBC) to jointly raise a $2.5 billion loan to revive the EACOP project.
By Friday afternoon the petition on the website of 350.org (one of the lobby movement leaders) had gained 19,991 actions with just nine more needed to reach the 20,000 target.
The pipeline was initially being sponsored by three multinational oil companies - Britain's Tullow, Total of France, and China National Offshore Oil Corporation Ltd (CNOOC).
But work on the pipeline has been suspended since August last year when Tullow’s efforts to sell its stake to the other project sponsors fell through.
By then preparations in both countries were already well underway following the signing of an initial inter-governmental agreement between Uganda and Tanzania securing the pipeline route in May 2017, although negotiations on some final key details of the pact were still in progress.
Stanbic Uganda and Sumitomo Mitsui of Japan are the project’s official financial advisors and debt financing for the pipeline is expected to amount to approximately $2.5 billion.
According to 350.org, the Ugandan government is expected to sign a deal with the two banks "in the coming months."
EACOP is set to be the longest heated pipeline in the world, carrying an estimated 216,000 barrels of crude oil per day (10.9 million metric tons per year) through heavily populated districts in both countries.
In their letter to Mr Adesina, the CSOs listed major risk factors for the project as fossil fuel expansion, corruption and human rights violations from large-scale land acquisition and resettlement, and threats to livelihoods, biodiversity and natural habitats along the pipeline route.