Several insurance companies have opted out of insuring the East African Crude Oil Pipeline (Eacop), adding to the project’s unending woes that have delayed construction for four years.
A total of 28 insurers have so far declared they will not insure Eacop following pressure from climate activists, who argue that the project poses significant pollution and human rights risks. However, AIG, Tokio Marine, Chaucer and Hiscox are still willing to insure the project.
Last week, SiriusPoint, Riverstone International, Enstar Group, and specialty insurers Blenheim and SA Meacock all ruled out insuring the transboundary project.
Riverstone International said in a statement that it “does not underwrite the Eacop project directly or indirectly, and nor does it intend to.”
SiriusPoint said it was “not participating in the Eacop tender” while Enstar, Blenheim and SA Meacock offered equally clear statements.
“These decisions come after months of targeted efforts by environmental organisations, including Coal Action Network, Insure Our Future and StopEACOP, to hold insurance firms accountable for their involvement in dirty energy projects that endanger local communities and pollute vital ecosystems.
“Pressure will now grow on remaining insurers, including AIG, Tokio Marine, Chaucer and Hiscox, to rule out involvement in the pipeline,” 350.org, a global grassroots climate change movement, said in a statement.
“What will they choose at this crucial moment? Short-term profits from dirty energy, leading to increasingly violent wildfires, floods and rising food prices? Or the safe, healthy world we all want for our loved ones? We need companies to make the right choice now,” said Will Attenborough of Coal Action Network.
Experts say this leaves the project hanging in the balance because local insurers cannot cover more than 30 percent of the insurance needed for the project.
According to Dickens Kamugisha, executive director of the Kampala-based Africa Institute for Energy Governance (Afiego), the Ugandan government is likely to lower its standards and offer attractive terms because it’s heavily indebted.
“The government currently has over $25 billion in debts, 80 percent of which has been accumulated during the time when it’s been pursuing these oil projects. The government is now desperate that it is likely that it will lower its expectations to attract investors,” Mr Kamugisha said.
The 1,443-kilometre pipeline from Hoima in western Uganda to the Tanzanian Indian Ocean port of Tanga, is majority-owned (62 percent) by French oil giant TotalEnergies and state oil companies of China, Uganda and Tanzania.
Eacop is planned to pass through areas of sensitive ecological importance, including national parks and wildlife reserves. There has been criticism from international environmentalists, but the Uganda National Oil Company chief legal and corporate affairs officer Peter Mulisa has allayed fears of the citizens of Uganda and Tanzania where the pipeline is passing, that all safety measures have been taken.
Western banks have recoiled from the project, while Chinese lenders, promising $3.5 billion, are still holding out on a final decision, which could potentially lead to delays.
Away from environmental concerns, the economic viability of the Eacop is also in question. The project is reliant on international oil prices, which are volatile. With the current global shift towards renewable energy sources, there is a real risk that the demand for crude oil could decline in the coming years, making the Eacop project economically unfeasible.
“The Ugandan oil projects are failing to attract international financing because these financial institutions know that the projects are not economically viable now that the world is moving away from fossil fuels to green energy. No sensible financial institution can invest in such projects,” Mr Kamugisha said.
At the recent COP28 in Dubai, nations acknowledged the necessity of transitioning from fossil fuels and the importance of financial institutions investing in clean energy solutions.
Building on that momentum, environmentalists aver that the insurance and banking industries must take responsibility to avoid involvement in fossil fuel projects and help steer the world towards a safe, healthy and just future.
According to Afiego’s Kamugisha, oil projects in Africa never benefit citizens as governments claim.
“We need to invest in cleaner energy that can also easily reach the citizens,” he said.
Angela Ambaho, head of corporate affairs at the Uganda National Oil Company said the project is “not struggling because we are already laying the pipeline.”
In November last year, Eacop commenced above-ground installations in bother Tanzania and Uganda, with a target of completing the project by December 2025.