Op-Ed

Financing the East African Crude Oil Pipeline is a big mistake 

By Landry Ninteretse 28 January 2020

Local groups and communities are seriously concerned about the impact the East African Crude Oil Pipeline will have on their lives, despite promises of compensation and employment. (Image: This file is licensed under the Creative Commons Attribution / Wikimedia)

At a time when the international scientific community is telling us the world cannot absorb new fossil fuel developments if we are to tackle the climate crisis, Uganda and Tanzania are planning to construct a highly controversial oil pipeline that threatens to destroy the livelihoods of tens of thousands and threaten extensive ecosystems with incomparable biodiversity.

Meant to transport the oil coming from three oil fields being developed in Uganda, the East African Crude Oil Pipeline (EACOP) would be the longest heated crude oil pipeline in the world, estimated to cost $2.5-billion. At full production, it is expected to transport up to 230,000 barrels a day.

Planned to run from the shores of Lake Albert, in Uganda, to the port city of Tanga, in Tanzania, the pipeline is expected to cause large-scale displacement of local communities and pose grave risks to protected environments, water sources and wetlands in both countries. Concerns have been raised on the impact of oil extraction on Lake Albert fisheries and the disastrous consequences of an oil spill in Lake Victoria that would affect millions of people (in approximately eight countries) that rely on the two lakes and their watersheds for drinking water and food production. 

Since the discovery of oilfields in 2006, Tullow Oil, Total, China National Offshore Oil Company (CNOOC) and the Uganda government have wrangled over taxes and recoverable costs amid opposition from local communities and lobby groups who have voiced concern over its potential environmental impact.

Local community concerns

Local groups and communities are seriously concerned about the impact the project will have on their lives; despite promises of compensation and employment. As detailed in the Environmental and Social Impact Assessment (ESIA) for the Ugandan portion of the pipeline, local communities raised numerous concerns over land acquisition and compensation for loss of land, livelihoods and properties. There were also concerns about forced resettlement, as well as the potential project impacts on air quality and climate change.

It is worth noting that the Africa Institute for Energy Governance (AFIEGO), an authoritative public policy research organisation and the Civil Society Coalition on Oil and Gas (CSCO), a coalition of 61 civil society organisations working on oil and gas issues in Uganda, have rejected the ESIA and called on Uganda’s National Environmental Management Authority (NEMA) and Ugandan citizens to reject the published ESIA report. AFIEGO’s analysis of the gaps in the document pointed to a failure to adequately consider the negative impacts of the project related to community livelihoods and critical ecosystems.

An independent quality review of the ESIA commissioned by NEMA and undertaken by the Netherlands Commission for Environmental Assessment concluded that the ESIA is biased in stressing the positive impacts and downplaying the negative ones. Economic benefits are highlighted and spelt out, while potential negative effects are concluded to be insignificant without proper, concrete, transparent assessment or justification.

All the more significant is that the ESIA for the Tanzanian portion of the pipeline (roughly 80% of its length) is yet to be published.

Africa’s future

Uganda’s President Yoweri Museveni has said proceeds from the oil, if invested well, will pave the way for the next phase of Uganda’s development. Uganda, with discoveries of six-billion barrels of oil resources, is keen to unlock as much as $20-billion of investment (in fossil fuels).

There has been a raging debate as to whether this development needs to be powered by fossil fuels such as coal, oil and gas; and the answer is NO.

The best analogy that can be used to answer this question is the one often used to describe what is now commonly referred to as leapfrog technologies. There was an unproven statistic in the 1990s that Manhattan had more phone lines than all the countries of Africa combined. This was until mobile phones came along, and Africa is currently the leader in mobile telephony penetration. Countries such as Kenya have higher internet penetration as compared to many countries in the north.

Africa has a rich abundance of natural resources that should be tapped to spur the growth of these countries. Solar and wind power have become competitive when compared to carbon-based generation. Economic forecasts have shown that renewable energy sources like solar and wind will increase their share of global power generation from the current 7% to roughly 25% by 2040.

Uganda and Tanzania as well as other African countries should therefore approach energy production with the same leapfrog technology mentality that brought about the mobile phone revolution in Africa and have the courage to tap into the wind and solar that is so abundant across the continent and keep the oil and gas in the ground.

Financiers need to reject this flawed project

South Africa’s Standard Bank, through its Ugandan subsidiary Stanbic and Japan’s Sumitomo Mitsui Banking Corporation (SMBC) are the lead financiers of the pipeline. 

If EACOP does proceed, with an ESIA that covers only 20% of the project’s length, and which has been rejected even by the government’s own advisers, Standard Bank and SMBC will be under pressure to show how they are complying with the Equator Principles, designed to promote environmental and social responsibility in project financing.

In June 2019, Standard Bank said it was reviewing a request by environmental lobbyists to halt funding the proposed pipeline but the latest information seems to be that the bank is set to ignore these impacts and the opposition of local groups and is keen to proceed with raising funding for the project.

The East Africa Crude Oil Pipeline poses unacceptable risks to both the global climate and local people and nature. Oil exploration and development in the region has already been associated with human rights abuses and illegal resettlement, as is evidenced by an increase in conflicts and crime in the districts of western Uganda; the pipeline, if developed, poses a high risk of further abuses. Relocation and loss of land from the pipeline threaten the employment and livelihoods of tens of thousands of people.

Further, oil from the EACOP pipeline will not directly benefit local people but will be destined for export markets. Rather than bringing wealth, oil extraction in Africa has too often been associated with the “resource curse” and extreme, intractable poverty – a fate which Uganda and Tanzania can still escape.

Financiers need to be on the right side of history and should be focused on green projects which will positively transform East Africa’s economies for future generations. Standard Bank, Stanbic and SMBC should publicly commit not to finance this disastrous project. MC

Landry is the Regional Team Leader of 350Africa.org

Read more: 

Tullow Oil has written off $800 million of its exploration costs in Uganda and Kenya after lowering its forecast for long-term crude oil prices.

Tullow Oil in August 2019 was unable to agree with the Government of Uganda on key tax issues relating to EACOP.

Total responds to questions from NGOs on its projects in Uganda.

Total’s suspension of the East African Crude Oil Pipeline is a chance for Standard Bank and others to think again.

In 2019, global and regional CSOs petitioned against the EACOP.

In 2020, the global movement 350.org and its partners have started a new petition against the EACOP.

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