Uganda (Commonwealth Union) _ After pressure from environmentalists caused some Western banks to back out of the project, Uganda is in advanced talks with Chinese export credit agency SINOSURE to offer funding for its crude oil pipeline, a top official said on Monday.
East African Crude Oil Pipeline (EACOP), a 1,445-kilometer (898-mile) pipeline, is intended to assist Uganda in exporting its crude from oilfields in the nation’s western region to a port on Tanzania’s Indian Ocean coast. It is jointly held by the governments of Tanzania’s Tanzania Petroleum Development Corporation (TPDC), France’s Total Energies (TTEF.PA), China’s CNOOC (0883.HK), and the Ugandan government.
Irene Bateebe, permanent secretary for Uganda’s Ministry of Energy and Mineral Development, said Reuters that the project will cost $5 billion, including the cost of credit, and that 40% of the funding will be generated through loan and the other 80% through equity.
Together with other people, we are securing funding through SINOSURE, which will be one of our largest debt donors, the woman explained. “We are attempting to close the financial gap. We are currently in the last stages of the financial close conversations, and we are optimistic that the debt component will be closed by the end of October”. Bateebe did not provide a precise figure for the amount of credit that SINOSURE would offer.
She claimed that they had experienced difficulties with Western banks as a result of pressure from environmental organizations to stop financing the project on the basis that the pipeline would damage the environment and increase carbon emissions.
“You next consider who your other friend is. We did have other pals who were eager to join us, so we turned eastward in that direction”, she claimed. Greenpeace and Friends of the Earth were two of the more than 260 organizations that signed a statement requesting banks not to fund the project in 2021. The pipeline has also been condemned by Human Rights Watch.
Since then, German lender Deutsche Bank (DBKGn.DE) has declared that it will not be contributing to the pipeline’s financing. Oil reserves were found in Uganda more than 10 years ago, and commercial production is anticipated to start in 2025.
The Chinese lenders, which include the Export-Import Bank of China (Eximbank) and the China Export & Credit Insurance Corporation (Sinosure), are anticipated to provide more than half of the $3 billion in loans needed to build the East African Crude Oil Pipeline (EACOP).
The pipeline, which is responsible for more than 50% of the overall debt, is being funded by Sinosure and Eximbank, according to Irene Bateebe, the permanent secretary of Uganda’s Ministry of Energy and Mineral Development.
The negotiations [with Chinese lenders] for a financial close are nearing their conclusion. According to Bateebe, we are sure that by the end of October this year, we will have closed the loan component and mobilized the majority of the project’s funds.
The negotiations with Chinese lenders are almost finished, and it’s anticipated that by the end of October, the loan component will be concluded and the majority of the project money will have been mobilized. Crude oil will be transported by the 1,443km (896 mile) pipeline from Uganda’s Lake Albert oilfields to Tanga, a port in Tanzania, where it will be sold in international markets.
Using a debt-to-equity ratio of 60:40, the financing structure involves $3 billion in secured debt and the remaining $2 billion in equity contributions from shareholders, including Total Energies, the Uganda National Oil Company, the Tanzania Petroleum Development Corporation, and the China National Offshore Oil Corporation (CNOOC).
