Africa’s Most Controversial Oil Pipeline Is Hanging In The Balance


Editor OilPrice.com
Thu, April 14, 2022

After years in the works, the fight over the East Africa oil pipeline continues. Environmentalists and local communities have long been battling against the proposed construction of a major pipeline running from Uganda to Tanzania. But oil majors working in the region believe it could dramatically enhance the region’s export routes, making it possible for landlocked Uganda to transport its crude more easily. But the pipeline continues to face major hurdles, with doubts over whether it will ever be finished.

The East African Crude Oil Pipeline (EACOP) is expected to be the world’s longest electrically heated oil pipeline, measuring 1440km and running from western Uganda to the Indian Ocean port of Tanga in Tanzania. TotalEnergies and China National Offshore Oil Corporation Ltd (CNOOC) originally expected to invest $3.5 billion in the EACOP, working with operators in the two countries - the Uganda National Oil Company (UNOC) and Tanzania Petroleum Development Corporation (TPDC). If completed, the pipeline could transport as much as 1 billion bpd of crude across the countries.

In late March, things were looking promising for Total as construction appeared imminent. The signing of a $10 billion final investment decision made its construction that much more likely. British energy firm Tullow Oil first discovered recoverable oil in Uganda in the Lake Albert basin in 2006 and TotalEnergies purchased Tullow’s stake in the region in 2020 but was unable to find suitable funding for the EACOP project until now.

However, there is significant opposition from locals, with 260 community groups across Uganda, Tanzania, and neighboring countries drawing awareness to the situation globally with the campaign #StopEACOP. Public protests, legal action, and media attention have helped delay the works for the last two years.

People are mainly concerned about the environmental impact of building such large-scale oil infrastructure. In early April, the UN Intergovernmental Panel on Climate Change stated that we can’t afford to build more fossil fuel infrastructure, drawing attention to major project proposals such as the EACOP. Estimates suggest that the pipeline could produce as much as 36 million tonnes of CO2 every year, around seven times Uganda’s annual emissions.

The more imminent impact of the pipeline is the displacement of up to 1,400 households, with inadequate compensation being offered. In addition, the destruction of wildlife habitats across the two countries seems inevitable, with the pipeline running through several major areas of endangered wildlife.

As Total continues with plans to go ahead with the pipeline, it has a limited window of time in which the world will accept this kind of major fossil fuel project. With oil demand still high and sanctions on Russia highlighting our dependence on the black gold, even now, Total may be able to gain enough support to see the project through. But as several oil majors and governments introduce ambitious climate targets for the end of the decade, this window is growing ever smaller.

The cancellation of the Keystone XL pipeline in 2020 demonstrates the sentiment felt by governments in approaching long-term oil and gas projects, with mounting public pressure to make the shift away from fossil fuels to renewable alternatives within the decade.

And the EACOP is hitting more hurdles, as insurers refuse to cover the pipeline, giving the negative long-term impact on the environment as the main reason. Multinational insurance firm, Munich Re, refused to insure it due to its potential harm to the climate. And, this week, major oil and gas insurer Allianz said it would not insure the pipeline, stating “Allianz is not providing direct insurance to the East African Crude Oil Pipeline project, as it neither meets our climate ambition nor falls within our ESG risk profile.”

Zurich, Axa, SCOR, Swiss Re, and Hannover Re have all also refused to insure the project, following pressure from the “StopEacop” alliance. The alliance also targeted several banks to encourage them to refuse to fund the project, including HSBC, Credit Suisse, Barclays, and BNP Paribas. Omar Elmawi, StopEacop campaign coordinator said “It is now official, 7 out of the 15 (re)insurers we have approached have concluded that Eacop is a huge risk for them to underwrite.”

But, despite hurdles, Uganda is largely in favor of the pipeline, as it could help further develop its oil industry and have a positive spillover effect on the national economy. Politicians have made grand promises about what the construction of the EACOP would mean for the country. With Uganda and Tanzania sharing a 30 percent stake in the pipeline, it would see some revenue coming back into the two countries. It could also lead to significant job creation.

Despite notable opposition, TotalEnergies continues to push for the construction of the EACOP, following two years of planning and fundraising. While several community groups and international organizations are opposed to the construction of new large-scale fossil fuel infrastructure, the government of Uganda sees great potential for the development of the industry to support the national economy. However, Total will have to gain approval and insurance fast if it hopes to see the EACOP development come to fruition.

By Felicity Bradstock for Oilprice.com