UGANDA is currently in advanced negotiations with the Chinese export credit agency SINOSURE to secure credit for its ambitious East African Crude Oil Pipeline (EACOP) project. This move comes as Western banks face increasing pressure from environmental advocates, causing some to withdraw from participating in the project.
The EACOP, spanning a length of 1,445 kilometres (898 miles), is strategically designed to facilitate the export of crude oil from Uganda’s western oilfields to a port situated along Tanzania’s Indian Ocean coastline. The project’s stakeholders include the government of Uganda, France’s TotalEnergies, China’s CNOOC, and Tanzania’s Tanzania Petroleum Development Corporation (TPDC).
The total cost of the EACOP project is estimated at $5bn, which includes the expenses related to securing credit. About 40 percent of this funding will be procured through debt financing, while the remaining portion will be raised through equity investments. Irene Bateebe, the Permanent Secretary for Uganda’s Ministry of Energy and Mineral Development, provided insights into the financing arrangement.
Bateebe stated, ‘Together with others, we are raising some financing through SINOSURE, which is going to be one of our biggest contributors to the debt.’ She expressed confidence in achieving financial closure by the end of October of the current year for the debt component of the project. However, specific details regarding the amount of credit to be extended by SINOSURE were not disclosed.
The decision to explore alternative financing sources like SINOSURE arose from challenges faced with Western banks. Environmental organisations exerted significant pressure on these lenders, urging them to discontinue their involvement in the project. Concerns raised by environmentalists primarily revolved around potential environmental damage and increased carbon emissions associated with the pipeline.
Bateebe highlighted the shift in Uganda’s approach, noting, ‘You then look at who is your other friend … we did have other friends who were willing to come onboard, and that’s where we looked; we became eastern-looking.’
In 2021, over 260 groups, including prominent organisations like Greenpeace and Friends of the Earth, jointly signed a letter urging financial institutions not to finance the EACOP project. Human Rights Watch also expressed concerns regarding the pipeline’s implications.
Among the Western banks, Deutsche Bank announced its decision to refrain from participating in the project, aligning with the concerns raised by environmental activists.
Uganda’s journey toward oil production commenced more than a decade ago, with commercial production anticipated to commence in 2025. The EACOP project serves as a critical infrastructure initiative to facilitate the export of Uganda’s oil resources, contributing to the nation’s economic development.