The East African Crude Oil Pipeline (Eacop) has attracted $300 million from alternative lenders as its proponents rush to save the project from pressure groups citing environmental concerns.
This week, Uganda received an additional pledge of $200 million from the Afriexim Bank towards erecting the pipeline whose total cost is $5 billion.
On October 3, Afriexim Bank executives, led by their chairman, Prof Benedict Oramah said they viewed the implementation of Eacop and related oil and gas projects, including financing of Uganda’s refinery, as a strategic business that will uplift African economies’ armoury to fight poverty.
Last month, the Islamic Development Bank also announced $100 million for the construction of Eacop, saying the lender’s Board of Executive Directors was ready to help in funding the project due to the importance of the oil and gas industry to the Uganda economy.
The money may be a trickle for now, but it could provide backup for the governments in Uganda and Tanzania to swat away growing pressure to abandon the project over pollution concerns.
French oil major TotalEnergies last month received censure from the European Parliament, citing rights violations and environmental problems.
Eacop is financed on a 60-40 percent debt-equity split, with lenders expected to provide loans while the shareholders – TotalEnergies, Uganda National Oil Company, Tanzania Petroleum Development Corporation and CNOOC – would raise the remainder through equity contribution.
The governments of Uganda and Tanzania have defended the project’s route as an integrated energy corridor that will transport crude oil and carry gas exports to the region, while eventually saving the environment by providing cleaner cooking fuel to villages.
Last week, President Yoweri Museveni said he initially did not support the idea of a pipeline as the best means to commercialise Uganda’s oil but later changed his mind on Eacop as it provides an alternative import channel for gas to Uganda.
“While we have a lot of oil, we don’t have much gas. Tanzania and Mozambique have a lot of gas. The same corridor where Eacop will run can bring a return pipeline to transport gas to Uganda. This is one of the reasons I am in support of the pipeline,” he explained at an oil and gas forum in Kampala.
Tanzania envisages final investment decision in 2025 for its $30 billion liquefied petroleum gas project, and production in 2029. Standard Bank Group, through its Ugandan subsidiary Stanbic Bank is one of the transaction advisors for the financing of Eacop, whose cost jumped from $3.5 billion to an estimated $5 billion, due to the increased cost of loans after major banks shunned the project as an environmental risk, lead investor TotalEnergies said in 2021.
Energy Minister Ruth Nankabirwa says Uganda is aware of the global push from fossil fuels to clean energy, but the country’s oil and gas projects are critical to enabling it to make the energy transition and should be accorded patience and understanding of the stage of its development.
“As a country, we are earnestly pursuing energy integration before we can talk about energy transition,” she said during the seventh edition of the Uganda International Oil and Gas Summit held in Kampala September 27 to 28.
She added that the Lake Albert oil and gas projects will see the government provide LPG to its citizens that still use biomass and argues that the oil and gas sector will thus play a key role in enabling the country to meet its climate change obligation as it provides cleaner energy options.
“The discovery of oil in Uganda is a unique chance to transform its economy by improving infrastructure and reduce poverty. We are proud to support the government with $100 million for the East Africa Crude Oil Pipeline Project to help export its oil,” the board said.