A section of the East African Crude Pipeline project. PHOTO/FILE/POOL
The government will need to dig deep into its pockets to fund its equity share worth trillions of shillings in developing EACOP. This follows Energy Minister Ruth Nankabirwa’s recent statement to Financial Times during the 29th Conference of the Parties to the UN Framework Convention on Climate Change in Baku, Azerbaijan. She revealed that the financing of the multi-billion-dollar project had been revised from the earlier 40:60 equity-to-debt ratio to 52:48.
EACOP is a 1,443 km heated pipeline that is expected to transport 170,000 barrels of Uganda’s oil daily to Tanga, Tanzania, for export. The pipeline, whose construction is projected to cost between $4 billion (Shs14.7 trillion) and $5 billion (Shs18.4 trillion), is being developed by four joint venture partners: Total Energies Uganda Ltd (holding 62%), Uganda National Oil Company (UNOC) and Tanzania Petroleum Development Corporation (TPDC) (each owning 15%), and the China National Offshore Oil Corporation (CNOOC) (holding 8%).
Under the new arrangement, each joint venture partner must increase their equity contributions to meet the budget for this costly infrastructure project. The equity represents the funds the four partners will raise proportionate to their shares, while debt financing refers to the loans secured from funders, including commercial banks, which will be repaid with interest in the future.
Monitor analysis shows that the four partners, who were supposed to fund the project with $1.6 billion (Shs5.8 trillion) to $2 billion (Shs7.6 trillion) under the old arrangement, must now raise between $2.08 billion (Shs7.6 trillion) and $2.6 billion (Shs9.5 trillion) due to the increased equity funding. UNOC, previously expected to raise Shs1.14 trillion for its 15% share, now needs to secure an estimated Shs1.4 trillion.
Ms Irene Batebe, Permanent Secretary of the Ministry of Energy, confirmed the upward revision of equity financing, stating it is “not significant.” She said the government, with Cabinet approval, has supported UNOC with additional equity and has so far raised $308 million (Shs1.1 trillion). Ms. Batebe added that documentation for the financing arrangements is largely complete and expects all negotiations to conclude within a few months.
Funding pitfalls
Delays in securing financing for EACOP’s construction have largely been attributed to protests by environmental activists. These demonstrations prompted major international banks to withdraw support for the deal. Activists argue that EACOP could cause irreparable damage to ecosystems in the Lake Victoria Basin and surrounding forests and game reserves, potentially disrupting food security, livelihoods, and animal habitats while contributing to pollution.
As a result of these delays, the project’s construction, initially scheduled to start in 2022, was postponed to July 2024. This has affected Uganda's timeline for pumping its first barrel of oil. Despite the challenges, Minister Nankabirwa stated that the project remains viable.
During a media-guided tour of the project, reporters observed pipes laid along the EACOP route, stretching 1,443 km from Hoima in Uganda to Tanga in Tanzania. Pump Station One (PS-1) is under construction and will receive crude oil from the Tilenga and Kingfisher development areas. At peak production, these areas are expected to produce a combined total of 230,000 barrels per day, of which 170,000 will be transported through the pipeline.
Trucks ferrying sand at the construction site of Pump Station One in Hoima District where feeder pipeline from Kingfisher development area and Tilenga will meet before oil is taken to the refinery.
Domestic refinery plans
The government expects to refine nine million liters of petroleum products at a planned refinery, including petrol, diesel, and kerosene. While six million liters will be consumed domestically, the remainder will be exported to East African countries. However, funding for the $3.5 billion refinery has not yet been secured.
Project progress
Despite opposition from environmentalists, officials claim the project has made significant progress. The pipeline’s construction involves the use of advanced technology to mitigate environmental risks. The buried pipeline will feature real-time satellite monitoring and control systems to detect and prevent potential leaks. According to Hadi Watfa, EACOP’s Above Ground Installation Manager, the pipeline’s materials and design ensure efficient heating and transportation of crude oil.
Ms Nankabirwa previously announced that funding would be sourced from the China Exim Bank, other Chinese financial institutions, and two African firms to cover the $3 billion needed to complete the project. However, this additional borrowing will further strain the country’s reserves as Uganda continues to meet its debt obligations. The IMF, in September 2024, reported that Uganda’s debt remains sustainable despite the challenges.
Legal challenges
The Appellate Division of the East African Court of Justice recently began hearing an appeal by Civil Society Organizations (CSOs) seeking to block EACOP’s construction. The CSOs argue the project will generate 28 million metric tons of carbon emissions annually, harming the environment. EACOP officials contend that the pipeline was designed to avoid sensitive areas and minimize environmental risks.
Two Ugandan CSOs, the Africa Institute for Energy Governance (Afiego) and the Centre for Food and Adequate Living Rights (Cefroht), together with Natural Justice and the Centre for Strategic Litigation from Kenya and Tanzania, launched a second attempt to stop the progress of the multibillion-dollar project. If completed, the project will transport crude oil from Hoima in Uganda to Tanga Port in Tanzania.
In November last year, the court dismissed the first attempt filed in 2020 after a panel of judges ruled that the petitioners were late in filing their case. Afiego's chief executive officer, Dickens Kamugisha, recently expressed optimism about their case, stating, “This pipeline will create 28 million metric tonnes of carbon emissions per year, which is disastrous to our ecosystem.”
In response to these claims, officials from EACOP Uganda Ltd, the firm contracted to construct the pipeline, said the project was designed to avoid sensitive environmental areas. The developers noted that the pipeline will be buried underground and consists of the latest technology to help mitigate any environmental hazards.
Mr Hadi Watfa, the manager in charge of Above Ground Installation for the EACOP Project, explained that the pipeline includes electrical and fiber optic cables running along its 1,444-km stretch. These cables will deliver heat and enable real-time satellite monitoring to prevent potential leaks. He elaborated, “We have what we call a substation, which, through these fiber optic cables, will detect any movement or leakage and identify the specific location. In no time, the control room for EACOP—including Unoc, Cnooc, Total [TotalEnergies], and all the other partners—will pinpoint the issue and respond. We have mainline block valves that can be shut off anytime from the control room, whether located here in Hoima or in Tanga.”
The pipeline, he added, was made with specialized materials to conserve heat, maintaining the crude oil at up to 50°C during transportation. “This is very sophisticated and employs the latest technology,” Mr Watfa said.
EACOP's construction has kicked off in earnest. Construction of Pump Station One (PS-1), which will receive all the crude oil from two Central Processing Facilities (CPFs)—one in the Kingfisher development area and the other in the Tilenga oil development area—is underway. During a four-day tour of the oil projects, journalists visited this pump station in Nyamasoga Village, Kabaale Sub-county, Hoima District.
Mr Watfa stated, “We are currently at the concrete stage, which will be completed around Christmas [December]. The remaining parts will be done between February and April. After completing the concrete work, equipment will be installed on top, connected to piping, cables, and control systems. I estimate that in 16 to 17 months, construction will be 100 percent complete. Before that, we will have three months of pre-commissioning for each subsystem, such as the pipes, electrical installations, and telecom installations, ensuring there are no leaks or deficiencies. This will be followed by another three months of commissioning to ensure all subsystems work in parallel without interface issues.”
Uganda's second pump station is under construction in Sembabule District. According to Mr. Watfa, this station will be fully operated automatically by the Electrical Instrumentation and Telecom Systems (EITS). “At PS-1, six people will monitor the pipeline. However, the station in Sembabule District will be operated remotely from here,” he explained.
The pump station in Kabaale Industrial Park is designed to receive all 230,000 barrels of oil daily from the Tilenga and Kingfisher projects.
Pipeline construction is progressing. Officials from EACOP Ltd said that 70 kilometers of pipeline have been welded and strung on both sides in Uganda and Tanzania. “Once welding and stringing are complete, the pipes will be laid in the ground at depths ranging between 1.5 meters and 2 meters, depending on the terrain,” explained Ms Stella Amony, EACOP's publicist.
ABOUT EACOP
The East African Crude Oil Pipeline Project (EACOP) is a buried, thermally insulated 24-inch pipeline designed to transport oil produced from Uganda's Lake Albert oilfields to Tanga Port in Tanzania. The crude oil will then be sold to world markets.
Once construction is complete and the topsoil and vegetation are reinstated, people and animals will be able to cross freely anywhere along its length. Approximately 80 percent of the pipeline is located in Tanzania. It will include six pumping stations, two in Uganda and four in Tanzania, and terminate at Tanga with a terminal and jetty for loading crude oil onto tankers.
Source: EACOP website
