Page 5 - AfrOil Week 05 2022

AfrOil COMMENTARY AfrOil

That pipeline was to be the longest of its kind reaching commercial agreement on EACOP
in the world, following a 1,445-km route from as an integrated part of the overall Lake Albert
Hoima in western Uganda to the port of Tanga Development Project is a significant milestone
on Tanzania’s Indian Ocean coast. in unlocking value for industry participants,
Then in November 2021, CNOOC took the the national oil companies of both Uganda and
step of making a final investment decision (FID) Tanzania, and the broader governments of both
on Kingfisher, which will eventually yield more nations. Regionally, this is an important step, as
than 40,000 bpd of oil. it signals multilateral co-operation between East
African nations to work in tandem to extract a
FID stage nation’s hydrocarbons.”
Now, as of February 1, 2022, TotalEnergies has Rycroft added: “With progress on Mozam-
joined its partners in reaching the FID stage on bique’s giant gas project delayed due to political
Tilenga. unrest and slow progress on the commerciali-
This is a considerably larger field, as it is sation of Tanzania’s offshore gas resources, it is
slated to produce about 204,000 bpd of crude clearly a solid step forward in the region to see
from about 400 wells drilled from more than FID on a $10bn mega-project taken by IOCs.”
30 pads. It will provide most of the throughput
for the EACOP link, and as such, the decision ESG encouragement
to proceed with work at Tilenga has freed the Altogether, these three initiatives are expected
French major and its partners in the EACOP to carry a price tag of $10bn. The EACOP pipe-
consortium – CNOOC, Uganda National Oil line is anticipated to account for about half of
Co. (UNOC) and Tanzania Petroleum Develop- the total, even though its price was originally
ment Corp. (TPDC) – to make an FID of their estimated at about $3.55bn.
own. The French major has never offered a detailed
In other words, both the upstream and the explanation as to why it raised the cost estimate
midstream projects– described collectively in a for the pipeline last year. Some observers have
statement issued by TotalEnergies on February speculated, however, that TotalEnergies and its
1 as the Lake Albert Development Project – are partners are having to pay higher risk premiums
now in motion. CNOOC and Total Energies because of activists’ efforts to discourage banks
have opted to move ahead with work at their sites from investing in the EACOP project on (ESG) EACOP’s cost
near Lake Albert, and both are ready to team environmental, social and governance grounds
up with the national oil companies (NOCs) of – and that these higher premiums are driving up increases may
Uganda and Tanzania to push forward to build the bill for the pipeline.
the pipeline that will handle production from Advocates of this view have pointed to the have been
their fields. fact that activists’ complaints have led the Brit-
This development has been hailed by Ugan- ish export credit agency UK Export Finance unavoidable,
da’s Minister of Energy and Mineral Develop- (UKEF), along with 11 commercial banks, to given that high
ment Ruth Nankabirwa, who said on February opt out of providing funding for the pipeline and
1 that the signing of documents with TotalEn- have also convinced the French insurer AXA not demand and
ergies and its partners would help improve the to provide coverage for the project. All of these
economy. The projects will create up to 160,000 institutions have cited climate considerations as supply chain
new jobs, while also pushing upstream develop- the reason for their decision, describing EACOP
ment work forward, she said. as incompatible with their commitment to fund disruptions drove
“This historic occasion now puts us on the projects in line with the Paris Agreement. prices for key
path to achieving first oil in 2025, as agreed in It is not entirely clear whether (or to what
April 2021,” she commented. She was speak- extent) the activist campaign has affected the supplies such as
ing at a signing ceremony attended by Ugan- cost of the EACOP pipeline. After all, ESG fac-
dan President Yoweri Museveni, Tanzanian tors are not the only consideration for TotalEn- steel up in 2021
Vice-President Philip Mpango and TotalEner- ergies and its partners, and cost increases were
gies CEO Patrick Pouyanné, as well as represent- perhaps unavoidable, given that high demand
atives of UNOC, TPDC and CNOOC. and supply chain disruptions drove prices for
The deal is good news for the host countries key supplies such as steel and construction
and for the entire region, commented Doug- materials to climb sharply in 2021.
las Rycroft, the director of UK-based Gneiss Nevertheless, ESG activists have a strong
Energy. “News this week of the FID decision enough perception of success that they are likely
by TotalEnergies on the Lake Albert Resources to continue pushing on this front. Landry Nin-
Development Project is very encouraging teretse, the regional director for Africa of 350.
for the East African energy sector as a whole, org, made clear that his organisation intended to
while for the Ugandan government more spe- keep fighting. In a press release dated January 31,
cifically, Tilenga and Kingfisher will generate he declared: “EACOP is not inevitable. In fact,
significant, and much needed, revenues as they it needs billions of dollars from private banks
ramp up to an expected plateau of 230,000 bpd around the world to become viable. Most of
following first oil in 2025,” he told NewsBase. these banks have already distanced themselves
“A critical aspect in the large-scale develop- from this controversial project. Together, we
ment of the Lake Albert resource potential has can further pressure the reluctant ones and stop
always been securing evacuation routes to the this fossil finance flowing into the East Africa
coast to justify full field development costs, so region.” ™

Week 05 02•February•2022 www. NEWSBASE .com P5