Africa’s most controversial oil pipeline is hanging in the balance

After several years in the works, the battle for the East African oil pipeline continues. Environmentalists and communities have long fought against the proposed construction of a major pipeline running from Uganda to Tanzania. But major oil companies operating in the region believe it can dramatically improve the region’s export routes, enabling inland Uganda to transport its crude oil more easily. But the pipeline continues to face major obstacles, with doubts about whether it will ever be completed.

The East African Crude Oil Pipeline (EACOP) is expected to become the world’s longest electrically heated oil pipeline, measuring 1,440 km and running from western Uganda to the port of Tanga in the Indian Ocean in Tanzania. TotalEnergies and China National Offshore Oil Corporation Ltd (CNOOC) initially expected to invest $ 3.5 billion in EACOP, working with operators in the two countries – 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 oil across countries.

At the end of March, things looked promising for Total as construction seemed imminent. The signing of a $ 10 billion final investment decision made its construction so much more likely. The British energy company Tullow Oil first discovered extractable oil in Uganda in the Lake Albert basin in 2006, and TotalEnergies bought Tullow’s stake in the region in 2020, but was unable to find appropriate funding for the EACOP project until now.

However, there is considerable opposition from local people, with 260 community groups in Uganda, Tanzania and neighboring countries drawing attention to the situation globally with the #StopEACOP campaign. Public protests, lawsuits and media attention have been delaying the works for the past two years. People are mainly concerned about the environmental impact of building such a large oil infrastructure. In early April, the UN Intergovernmental Panel on Climate Change stated that we can not afford to build more infrastructure for fossil fuels, drawing attention to major project proposals such as the EACOP. Estimates suggest that the pipeline could produce as much as 36 million tons CO2 each year about seven times Uganda’s annual emissions.

The more imminent effect of the pipeline is displacement of up to 1,400 householdswith insufficient compensation. In addition, the destruction of wildlife habitats across the two countries seems inevitable, as the pipeline runs through several large areas of endangered wildlife.

As Total continues with plans to move forward with the pipeline, it has a limited time period in which the world will accept this kind of large fossil fuel projects. With still high oil demand and sanctions against Russia highlighting our dependence on black gold, Total may even now have enough support to see the project through. But as more oil companies and governments introduce ambitious climate targets by the end of the decade, this window is getting smaller.

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

And EACOP hits several obstacles as insurance companies refuse to cover the pipeline, giving the negative long-term impact on the environment as the main reason. The multinational insurance company, Munich Re, refused to insure it because of its potential damage to the climate. And this week, the major oil and gas insurance company Allianz said it would not insure the pipeline, indicates “Allianz does not provide direct insurance for 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 “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) insurance companies we have approached have concluded that Eacop is a huge risk for them to take out.”

But despite obstacles, Uganda is very much in favor of the pipeline, as it can help further develop its oil industry and have a positive spill-over effect on the national economy. Politicians have made great promises about what the construction of the EACOP would mean for the country. With Uganda and Tanzania sharing 30 percent of the shares in the pipeline, it would see some revenue come back to the two countries. It can also lead to significant job creation.

Despite notable opposition, TotalEnergies continues to push for the construction of the EACOP after 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 Ugandan government sees great potential for industrial development to support the national economy. However, Total will have to quickly obtain approval and insurance if it hopes to see the EACOP development become a reality.

By Felicity Bradstock for Oilprice.com

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