The East African crude oil pipeline (Eacop) project took a new turn on Monday, citing environmental and social risks to convince 263 non-governmental organizations to convince at least 25 banks listed as potential financiers of the $ 3.5 billion development not to participate.
The NGOs in their letter to the lenders claimed the project would fuel climate change by transporting oil with annual CO2 emissions of over 34 million tons.
Under pressure to stop funding fossil fuels including coal projects, six banks that have targeted the pipeline’s main investors – French oil major Total, China National Offshore Oil Corporation (CNOOC), and the Uganda and Tanzania governments – have targeted lenders , this announced not participate.
At 1,445 kilometers, the Eacop is said to be the world’s longest heated crude oil pipeline, stretching across Uganda and Tanzania and posing a tremendous threat to local communities, water supplies and biodiversity in Uganda, Tanzania, the Democratic Republic of the Congo and Kenya in theirs Letter.
The pipeline will transport crude oil from the Hoima district in western Uganda to Chongoleani in Tanga, the north-eastern port city in Tanzania.
The letter is addressed to Sim Tshabalala, the CEO of Standard Bank of South Africa, and its Ugandan subsidiary Stanbic Bank Uganda boss Anne Juuko.
Others include Chen Siqing, Chairman and CEO of Industrial and Commercial Bank of China (ICBC), and Makoto Takashima, President and CEO of Sumitomo Mitsui Banking Corporation (SMBC).
The three lenders – Standard Bank, ICBC and SMBC from Japan – are the financial advisors for the project. The other 22 banks contacted by the organizations recently funded Total and CNOOC.
Should the banks give in to the pressure, it would deal a blow to Uganda’s oil dream, which has been stuttering for more than a decade.
The letter comes at a time when speculation is high about the impending signing of the long-awaited final investment decision (FID) oil deal.
In an email interview with The EastAfrican, Ryan Brightwell, a researcher and editor for the Netherlands-based NGO BankTrack, said one of the leading petitioners that half a dozen banks said they would not participate in the project.
“We have contacted dozens of banks about this project, and at least six have now privately told us that they will not interfere or are very unlikely to intervene. We are asking them to make public statements to confirm that,” he said.
He added that most banks have policies in place not to fund projects that would impact areas designated as wetlands or wildlife habitats. This should exclude them from the pipeline project as the risks to important wetlands, forests and other habitats are very clear.
However, he acknowledged that with the FID expected soon, it may be too late for some lenders to abandon their involvement.
“We have had several discussions with Standard Bank and its Ugandan subsidiary Stanbic, who are of course a key advisor to the project. While they listened to our concerns, they are still quite publicly connected to the project, even though it has to be a big project Risk to them, “said Mr. Brightwell.
Likewise, the government of Uganda is unfazed by concerns about the environmental impact of the project.
“Of course everything has a cost, but there are mitigation measures. As for the pipeline, we can plant trees along the route. It’s not really expensive,” said Robert Kasande, permanent secretary at the Department of Energy.
Almost a third of the pipeline will run through the basin of Africa’s largest lake, Lake Victoria, on which more than 40 million people depend for water and food production.
It will also cross more than 200 rivers, flow through thousands of farms, and cut through vital game reserves.
Eacop is expected to cost around $ 3.5 billion, of which around $ 2.5 billion will be borrowed from banks and other financiers, while 30 percent of the project will be funded by equity from oil companies Total, CNOOC and Uganda National Oil Company and the host governments are funded by the Tanzania Pipeline Development Company.
It is not yet clear which banks intend to get involved, although the three banks that will act as financial advisors are likely to join and act as lead arrangers.
UK Export Finance, an export credit agency for the UK, has also confirmed it was approached for a project loan, despite consulting at a time on a recent announcement to end funding for fossil fuel projects overseas.
The main signatories of the open letter include Friends of the Earth International, 350.org, the Catholic Overseas Development Agency, Reclaim Finance, Sierra Club, Global Witness, the IUCN National Committee of the Netherlands, BankTrack and the Africa Institute for Energy Governance (Afiego) and Inclusive Development International (IDI).