Intricate talks under way on East African Crude Oil Pipeline

9th April 2021 By: John Muchira - Creamer Media Correspondent

Partners in the East African Crude Oil Pipeline (Eacop) project are racing against time to conclude crucial agreements ahead of the signing of the final investment decision in the second quarter of this year.

France’s Total Exploration & Production and China National Offshore Oil Company, together with the Ugandan and Tanzanian governments, are currently involved in intricate negotiations to firm up the commercial and legal framework for the $3.5-billion project.

Equity Contribution

This comes after Uganda National Oil Company announced that it wanted the country’s Treasury to allocate $130-million in the coming fiscal year to fund part of its equity contribution to the project.

“This money is needed before international oil companies make a final investment decision in the next few weeks,” said Finance Minister Matia Kasaija.

Key agreements that must be concluded ahead of the final investment decision include the shareholders’ agreement, the tariff and transportation agreement, the Eacop Bill and the engineering, procurement and construction management agreement.

These agreements are crucial, because they will define the shareholding structure, each partner’s obligations – including financing – the tariff for use of the pipeline and the technical and legislative aspects of the project, which cuts across two countries.

The project, however, faces resistance from over 260 nongovernmental organisations (NGOs), which have called on 25 banks listed as potential financiers not to participate, citing environmental and social risks.

The NGOs reckon the project would fuel climate change.

“It is difficult to conceive of a more dangerous project at a more perilous moment for the planet than the Eacop. “The good news is that it’s not too late to stop this project and the global warming calamity that it would accelerate,” says Inclusive Development International executive director David Pred.

Way Forward

The petition has forced Standard Bank of South Africa, which is acting as one of the advisers to the project to help secure the $2.5-billion loan required for construction, to rethink its position. The bank has hired an independent environmental and social adviser to advise it on the way forward.

The 1 445 km pipeline is designed to transport crude from the Lake Albertine oilfields, in Uganda, to the Port of Tanga, in Tanzania, for export to international markets.

The facility will transport 216 000 barrels of crude oil a day (equivalent to 10.9-million metric tons a year) at “plateau production”.

About 1.7-billion barrels of recoverable oil has been discovered in the region, which is on the border of Uganda and the Democratic Republic of Congo.