What you need to know:
- EACOP says government has so far “made good progress” in scouting for 60 percent of the capital requirements in the international financial markets.
The East African Crude Oil Pipeline (EACOP) has said scouting for debt financing to construct the 1,443 kilometre oil pipeline will end before close of this year.
Speaking at a meeting with Uganda Investment Authority, Mr John-Bosco Habumugisha, the EACOP deputy managing director, said government has so far “made good progress” in scouting for 60 percent of the capital requirements in the international financial markets.
The cost estimates for EACOP stand between $3.5 and $4b with a 40 to 60 percent equity to debt ratio.
This implies that close to $2.4b (about Shs9 trillion) will be secured as debt, while $1.6b (Shs6 trillion) will be equity financed by shareholders.
The shareholders include Total Energies at 62 percent, Uganda National Oil Company (UNOC) at 15 percent, Tanzania Petroleum Development Corporation (TPDC) at 15 percent, and China National Offshore Oil Corporation (CNOOC) at 8 percent.
Mr Habumugisha had led an EACOP delegation to receive an investment license for pipeline activities.
The license handed over by Mr Robert Mukiza, the UIA director general, has conditions such as maintaining proper financial and accounting records, respect of conditions in the approved Environmental and Social Impact Assessment certificates, ensuring a gender-sensitive working environment and respect and protection of human rights among others.
UIA, under the Investment Code Act 2019, issues an Investment License to both domestic and foreign companies.
“The investment license speaks to the investors we are looking for at a global level for the financing of the project,” Mr Habumugisha said, noting that it adds to other initiatives such as environmental and social impact assessment under the International Finance Corporation standards, which have been done to satisfy lenders.
In September last year, Saudi’s Islamic Development Bank announced financing of $100m (Shs377b), which was part of the Islamic tranche for energy projects. The bank, in a statement said, the financing was to enable Uganda, a landlocked country to untap its oil reserves and emerge as a regional producer with export capacity to international markets.
The oil pipeline financing has faced drawbacks with criticism from a section of non- governmental organisations, including civil suits, which have advocated for a cut back on its financing over climate concerns.
NGOs under #StopEACOP Movement, which is composed of local and European climate justice activists have previously demanded that international financial institutions publicly pledge not to provide the 60 percent debt financing towards the oil pipeline. The debate largely stems from the energy transition that has forced some banks to cut back on financing oil projects.
In December last year, HSBC Bank, one of the largest oil financiers announced that it would no longer provide new lending or capital markets finance for the specific purpose of projects pertaining to new oil and gas fields and related infrastructure when the primary use is in conjunction with new fields.
The International Energy Agency’s 2021 Net Zero by 2050 report states that an orderly transition requires continued financing and investment in existing oil and gas fields to maintain the necessary output - with 2020 financing levels maintained through 2030 and declining to half thereafter.
HSBC Bank, in a statement quoted the Net Zero report, which states that an orderly transition requires continued financing and investment in existing oil and gas fields to maintain the necessary output – with 2020 financing levels maintained through 2030 and declining to half thereafter.