Standard Bank reviewing oil pipeline financing concerns

The pipeline project remains a subject of debate with some, especially in civil society, claiming it will have adverse impact on the environment. Photo | Courtesy 

What you need to know:

  • Civil society organisations, in their letter, however, want the banks to among others publicly commit not to participate in financing the oil pipeline project.

Standard Bank Group has said a “preliminary finding report is currently under review” of the key concerns, especially on the environment and social impacts, related to the proposed East African Crude Oil Pipeline (EACOP).

In a statement to an inquiry by Daily Monitor after a group of civil society actors from 49 countries wrote to chief executives of 26 banks to shun the multi-billion dollar infrastructure over environmental concerns, the bank said: “It is following its own internal processes and, along with its advisory banking partners” and has employed an independent environmental and social advisor relating to the project.

“We support responsible investment through assessing and managing our environmental, social and governance risks,” the bank said, and that their new fossil fuels financing policy sets out stringent conditions for lending to fossil fuel projects, including requiring project owners to commit to minimising or reducing greenhouse gas emissions.

Last Thursday, some 260 civil society groups wrote to Stanbic Bank and its Standard Bank Group parent company, Industrial & Commercial Bank of China, and Japan’s Sumitomo Mitsui Banking Corporation raising “deep concerns” about the EACOP.  The banks are financial advisers on the project.
“Contrary to what proponents argue, the EACOP will not “unlock East Africa’s potential”. 

East Africa needs energy security based on widespread rollout of renewables and the millions of clean jobs that come with it, and it needs to protect its natural heritage. At this critical juncture, it needs governments, financial institutions and the energy industry squarely focused on the task of managing a just transition to a low-carbon future,” the letter authored by civil social organisations reads in part.

Standard Bank, however, defended that for large infrastructure transactions “we apply industry guidelines and international - International Finance Corporation’s (IFC’s) Performance Standards.”

Civil social organisations first wrote to the banks over the same in 2018 but their calls were ignored. 
The second attempt comes at a time of renewed optimism of government and the oil companies reaching Final Investment Decision (FID) “soon.”

The capital expenditure for the 1,443km project is about $3.55b (shs13 trillion), 70 per cent of which will be raised from international lenders.
Both government and Total E&P, the lead developer, have previously discounted claims of the negative environmental footprint posed by EACOP.
They say the project is compliant to IFC standards and Environmental and Social Impact Assessment (ESIA) details various mitigation measures.
The voluminous ESIA report for Uganda detailing potential impact on the economy, people, and environment was submitted to the National Environment Management Authority in January 2019. 
According to the report, a partially aboveground pipeline was considered but the option was not taken further because of security and safety concerns, risk of interference by people, and its effects on views and the movement of large animals: hence a buried pipeline was selected.

“The significance of the impact was determined without, and then with, mitigation measures applied. Measures to reduce the impacts were developed continually until, as much as possible, an impact was no longer ranked as significant. Any effects left after mitigation are called residual impacts,” the study indicates.

For example, on bio-diversity, ESIA details that the pipeline’s area of “influence is mostly in habitats which have been changed by humans, but with some natural habitats inside and outside areas protected by law.” 
Habitats of conservation importance within the pipeline’s corridor include semi-evergreen forest and wetland forests, which are categorised as “highly threatened and unique ecosystems” as defined by IFC.

The Ugandan section of the pipeline - from Hoima to Mutukula - is 296km, through 10 districts of Hoima, Kikuube, Kakumiro, Kyankwanzi, Mubende, Gomba, Sembabule, Lwengo, Kyotera and Rakai. The projects affects some 4,121 persons in Uganda and 10,500 in Tanzania where it cuts through 25 districts en route to the Indian Ocean port of Tanga.

Project affected property assessed and valued                                
The Petroleum Authority of Uganda’s corporate affairs manager, Ms Gloria Ssebikari told Daily Monitor all project affected persons have been identified and affected property assessed and valued, and planning for resettlement action plan and land acquisition phases are underway.

“Compensation rates for crops and structures are determined by district land boards while land rates are determined based on market values. All these are based on prevailing market rates for the financial year in question. Since EACOP traverses 10 districts, the implication is that the different districts will have distinct rates,” Ms Ssebikari said in an email.

“The [project affected persons] will be compensated as per the valuation reports approved by the chief government valuer and Ministry of Lands. On approval of the valuation reports, the compensation amounts are individually disclosed to the project affected persons in the presence of their spouses.”

Civil society organisations, in their letter, however, want the banks to among others publicly commit not to participate in financing the EACOP project, engage with the governments of Uganda and Tanzania and other financiers to promote an energy future for East Africa that does not rely on oil or other fossil fuels, and demand that Total E&P acts immediately to provide adequate compensation to affected persons.