Lenders rescue stalled Eacop with $300m

By JULES BARIGABA

The East African Crude Oil Pipeline (Eacop) has attracted $300m from alternative lenders as its supporters rush to save the project from lobby groups citing environmental concerns.

This week, Uganda received an additional pledge of $200 million from Afrexim Bank for the erection of the pipeline at a total cost of $5 billion.

On October 3, the executives of Afrexim Bank, led by their chairman, Prof. Benedict Oramah, said they were considering the implementation of Eacop and related oil and gas projects, including the financing of the Ugandan refinery , as a strategic undertaking that will strengthen the arsenal of African economies to fight poverty. .

Last month, the Islamic Development Bank also announced $100 million for the construction of Eacop, saying the lender’s board was ready to help finance the project due to the importance of the industry. oil and gas for the Ugandan economy.

The money may be a trickle for now, but it could provide help to the Ugandan and Tanzanian governments to ease mounting pressure to abandon the project due to pollution concerns.

Last month, French oil major TotalEnergies received censure from the European Parliament, citing rights abuses and environmental concerns.

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Eacop is funded on a 60-40% split of debt and equity, with lenders expected to provide loans while shareholders – TotalEnergies, Uganda National Oil Company, Tanzania Petroleum Development Corporation and CNOOC – would raise the rest through equity contributions. own funds.

The Ugandan and Tanzanian governments have championed the project route as an integrated energy corridor that will transport crude oil and transport gas exports to the region, while preserving the environment by providing cleaner cooking fuel to villages.

Last week, President Yoweri Museveni said he was initially not in favor of the idea of ​​a pipeline as the best way to market Ugandan oil, but later changed his mind about Eacop because he offers an alternative import channel for gas to Uganda.

“Although we have a lot of oil, we don’t have a lot of gas. Tanzania and Mozambique have plenty of gas. The same corridor where Eacop will operate can bring a return pipeline to transport gas to Uganda. This is one of the reasons why I support the pipeline,” he explained at an oil and gas forum in Kampala.

Tanzania is eyeing the 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 advisers in transaction for the Eacop financing, the cost of which fell from $3.5 billion to around $5 billion, due to the increase in the cost of loans after the major banks avoided the project as a risk environmental, lead investor TotalEnergies said in 2021.

Energy Minister Ruth Nankabirwa said Uganda is aware of the global push from fossil fuels to clean energy, but the country’s oil and gas projects are key to enabling it to make the energy transition and should have patience and understanding of the stage of its development.

“As a country, we are seriously pursuing energy integration before we can talk about energy transition,” she said at the seventh Uganda International Oil and Gas Summit held in Kampala. September 27 and 28.

She added that the Lake Albert oil and gas projects will see the government supply LPG to its citizens who are still using biomass and argues that the oil and gas sector will thus play a key role in enabling the country to meet its LPG obligation. of climate change as it provides cleaner energy options.

“The discovery of oil in Uganda is a unique opportunity to transform its economy by improving infrastructure and reducing 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.

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