Banks opt out of East Africa Crude oil pipeline funding

The $3.5b East Africa Crude Oil Pipeline (EACOP) project could run into trouble after some international commercial banks withdrew from funding the construction of the world’s longest heated crude oil pipeline proposed by French Oil Company Total and the China National Offshore Oil Corporation (CNOOC).

 “The banks provided statements making it clear they will not support the East Africa Crude Oil Pipeline [EACOP]after an open letter endorsed by 263 organisations from around the world was sent to 25 banks considered most likely to be approached for financing,” a March 18 press release from Inclusive Development International, read in part.

“Barclays does not intend to participate in the financing of the East African Crude Oil Pipeline project,” it further read.

Credit Suisse is also said to share the same position with Barclays.

On this, an alliance of African and international environmental and human rights organisations have claimed another win in their campaign to stop the construction of the oil pipeline.

Bank Track, which is among these organisations, raised the red flag over alleged ignored social and environmental concerns along with the project.

 “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 EACOP,” Mr Ryan Brightwell, the Researcher and Editor at BankTrack, said.

When Daily Monitor asked Mr Brightwell about the authenticity of the quoted bank statements in their release, responded in an email, “the banks provided the statements to us, with permission for us to publish them on the stopeacop.net website: https://www.stopeacop.net/banks-checklist. If you wish to confirm these statements with the banks themselves or seek further comment from them, may I suggest you contact their press offices.”

Daily Monitor sought confirmation from Credit Suisse through the Media Relations, Credit Suisse Group in Zurich, Switzerland, both on email and phone calls. “Thanks for reaching out. I can confirm: Credit Suisse is not considering participating in the EACOP project. Kind regards,” Mr Yannick Orto, the Credit Suisse Services Ag Group External Communications in Zürich, responded.

Mr Orto said as a bank policy, they will not give the reason why they are not supporting the EACOP and advised everyone to only use their “public statement” .

Daily Monitor could not reach Barclays Bank through its corporate and investment contacts as provided on the bank’s website for press and media. Our  calls could not be answered by the bank and the voice mail message left was not returned.

However, the bank is quoted on the #STOPEACOP campaign: “Barclays does not intend to participate in the financing of the East African Crude Oil Pipeline project” as its public statement.

“Besides climate and environmental risks, our field investigations reveal serious human rights violations already caused by EACOP, with tens of thousands of people deprived of their livelihoods before having received any compensation. We call on French banks to commit themselves quickly and publicly not to finance this project,” Juliette Renaud, the senior campaigner at Friends of the Earth France, said. 

It is, however, not clear whether the banks’ refusal to finance the project is related to the environment. Mr Samuel Okulony, the chief executive officer of the Uganda-based Environment Governance Institute, said the next 10 years will be critical for efforts to mitigate the severity of climate change and that the pipeline will generate an additional 34 million tonnes of carbon emissions each year, which is disastrous.

Mr David Pred, the executive director of Inclusive Development International, said it would be a significant blow to the project if Standard Bank was to walk away, given the key role it has played as a financial advisor in arranging the $2.5 billion project loan that is required to finance construction.

 “Any credible assessment would find that this project is too risky for the millions of people whose water resources it would jeopardise and for our rapidly warming climate, which simply cannot afford another massive oil project,” Mr Pred said. 

Affected persons

 The environmental and rights activists say the project stretching nearly 1,445 kms threatens to displace families and farmers and would pose risk to water resources and wetlands – including the Lake Victoria basin, which more than 40 million people rely on.

According to a report released by Oxfam International in September 2020 titled ‘‘empty promises down the line’’ a human rights impact assessment on the EACOP, approximately 200 households will be relocated.

The report adds that an estimated 3,200 to 3,500 households will be economically displaced, meaning they will lose land whereas in Tanzania, 391 households will lose land as part of the priority areas and 9,122 will lose land for the pipeline right of way.

Oil companies, government respond

Both the oil companies and government have been slow to comment.

Ms Linda Nabirye, the external communications coordinator for Total E&P Uganda, referred us to their March 8 press release that responds to some issues raised by the banks and the NGOs.

The release titled: “Uganda and Tanzania: Total acts in transparency on social and environmental stakes of the Lake Albert resources development project,” said the projects Tilenga in Uganda and the EACOP in Uganda and Tanzania “are undertaken in a sensitive environmental context and require the implementation of land acquisition programmes with a specific attention to respecting the rights of the communities concerned.”

Total says environmental and social impact assessment (ESIA) studies have been conducted and approved by the Ugandan and Tanzanian authorities for both projects, which are carried out in compliance with the stringent performance standards of the International Finance Corporation (IFC).

Total also said it would work closely with Uganda Wildlife Authority and with IUCN experts to integrate the best practices for the protection of chimpanzees, particularly by promoting the conservation of forest habitats.

Ms Amina Bukenya, the spokesperson for CNOOC, asked us to send questions on her email which she had not responded to by press time.

On the government side, Ms Stella Amony, the communications lead for EACOP, replied: “The matter is sensitive and needs a collective response from the joint venture members.”

Ms Angella Karisa Ambaho, the communications Officer of Uganda National Oil Company (UNOC) said: “I am still waiting for approval of my response to your questions you raised on email, which I shared with my superiors”.

Established in 2013, UNOC is mandated to hold 15 per cent of Uganda’s petroleum licences on behalf of the government.

Local NGOs take on the issue

Africa Institute for Energy Governance (AFIEGO), a registered public policy research and advocacy organisation whose main objectives is to promote environmental conservation and community rights in the extractives sector, said the banks turning down requests to finance CNOOC and Total is a signal to other financiers to  consider their .

“....Climate change, environmental and social risks of the project are immense and when banks see other financial institutions taking a step back and refusing to finance the project, they also re-assess their participation,” Ms Diana Nabiruma, the senior communications officer at AFIEGO, said.

Mr Brian Nahamya, a programmes associate at Global Rights Alert, an NGO involved in advocacy for the oil pipeline PAPs, said the land acquisition was done but no project affected person has received compensation since the end of the valuation process in 2018/2019.

‘‘...Every person affected by this project from Hoima to Rakai, no one has received compensation up to date,” he said.

Holes poked on EACOP Environmental remedies

Despite the National Environment Management Authority (Nema) issuing a certificate of approval to Total East Africa for an Environmental and Social Impact Assessment (ESIA) as required by law on such a project in 2019, other international environmentalists have poked holes in it.

Section 3.3 of the Netherlands Commission for Environmental Assessment (NCEA)  report on water and wetlands crossings and water use contends that “The ESIA does not make clear why open trench river crossings are chosen as the way to go. This is critical as major rivers typically come together with wide wetlands.”

The oil pipeline route

In Uganda, the oil pipeline will traverse through Hoima, Kikuube, Kakumiro, Mubende, Kyankwanzi, Gomba, Rakai, Lwengo, Kyotera, and Sembabule districts. 

According to the East Africa Crude Oil Pipeline Environment and Impact Assessment Report 2019, the pipeline will originate from Kabaale, Hoima District and snake through different communities for a distance of 296km before it approaches the Uganda-Tanzanian border.

About the project

The East African Crude Oil Pipeline (EACOP) is a proposed 1,445km-pipeline that will transport oil from Hoima in Uganda to Tanga port in Tanzania.

About 1.7 billion barrels of recoverable oil have been discovered in the Albertine Graben, the basin of Lake Albert, on the border between Uganda and DR Congo. The extraction will take place at two oil fields: the Kingfisher field, operated by China National Offshore Oil Corporation (CNOOC) and the Tilenga field, operated by Total S.A.

In September 2020 both Tanzania and Uganda agreed on the $3.5b oil pipeline project after years of discussing the relative merits of different routes out to the Indian Ocean.

Work was scheduled to start by the end of 2020 but the Covid-19 pandemic delayed the project. Tanzania says the project will create 10,000 jobs and that more than 90,000 people would be compensated to pave the way for the pipeline.

The oil will be partly refined in Uganda to supply the local market and partly exported to the international market via the EACOP.  The project is being implemented by a joint venture of oil companies operating in the Albertine Graben including CNOOC and Total and Uganda government through the Uganda National Oil Company and Tanzania Petroleum Development Corporation.