Uganda seeks $1.8 billion in loans for construction of East African Crude Oil Pipeline
Uganda is considering borrowing $1.8 billion from global financial institutions to fund the construction of the East African Crude Oil Pipeline (EACOP). The total cost of the project is estimated to be between $3.5 billion and $4 billion, and the country lacks the necessary funds in its coffers, hence the need for borrowing. The Minister for Energy and Mineral Development, Ruth Nankabirwa, announced that construction will begin once a significant portion of the required finances has been secured through debt financing. About 40% of the funds have been raised, with hopes pinned on the Export-Import Bank of China (EXIM) for the rest.
Uganda is contemplating on borrowing 1.8 Billion USD from global financial institutions to kick-start the process of the construction of East African Crude Oil Pipeline (EACOP).
The project which sparked sharp criticisms from environmental conservationists and the western world is estimated to consume between $3.5 Billion and $4 Billion, money not available in the country’s coffers, for which a huge chunk is to be raised through borrowing.
This revelation was made by the Minister for Energy and Mineral Development Hon. Ruth Nankabirwa, in which she divulged that works on the project will start after securing significant part of finances needed through debt financing.
About 40% of the funds have been raised, according to Hon. Nankabirwa, and the search for the rest of the monies is on, with most hopes pinned in the Export-Import Bank of China (EXIM).
Proposed construction of EACOP has irked anti-fossil fuel campaigners, who have issued stern warnings to banks against financing the pipeline needed to transport crude from the oil wells in the Albertine Graben to the port of Tanga in Tanzania, after which it would access global markets.
Some foreign banks, most especially the western-oriented ones indicated their unwillingness to help, however this is not the same case with Exim, which is ready to supply the finances, something that was confirmed by Hon. Nankabirwa.
The project has met stiff opposition from environmentalists claiming that disaster will come from the oil production activities, together with the construction of the 1,443km long EACOP, which when completed will be the longest heated crude oil pipeline in the world.
Up to 20 banks and 13 insurers have reportedly backed off the projects following activists’ pressure. They reportedly include Allianz Group, Swiss Re, HSBC, and BNP Paribas. More troublesome for the project, several top international reinsurers, including Munich Re, Swiss Re, Hannover Re, SCOR, TALANX, Chaucer, Beazley, AEGIS London, AIG, Aspen, Chubb, Liberty Mutual, Marsh McLennan, and Lloyd’s have also said they will not reinsure the EACOP.
However, Finance Minister Matia Kasaija told the press that there is no cause for an alarm on where monies will come from, noting that they will look for other partners to fund the exploitation of Uganda’s vast energy reserves, chiefly oil and gas.
Uganda National Oil Company (UNOC) which is a shareholding entity for the project has already paid its own equity share to EACOP, according to Hon. Nankabirwa. Equity to the project is estimated at $2.4 Billion.
The shareholders of EACOP include; the Uganda National Oil Company (UNOC) with 15%; the Joint Venture Partners (Total Holdings International B.V. with 62% and CNOOC Uganda Limited with 8%) and the Tanzania Petroleum Development Corporation (TPDC).
The DRC Ministry of Hydrocarbons said in a Twitter statement on Tuesday 9th May 2023 that its minister, Didier Budimbu, met Uganda’s Energy Minister Nankabirwa Ssentamu, with discussions involving access to the pipeline.
“Uganda acknowledged the crucial requirement of DRC to access the East African Crude Oil Pipeline (EACOP) for the transport of crude oil to be produced from the oil exploration blocks located in the Albertine Graben in the Democratic Republic of Congo,” the statement read.
