Page 5 - AfrOil Week 34 2021

AfrOil COMMENTARY AfrOil

Revised financing plans such as the Africa Institute for Energy Govern-
According to previous reports, equity in the ance and the Alliance for Food Sovereignty in
pipeline consortium will be split 37.5% to Africa.
TotalEnergies, 37.5% to CNOOC, 15% to The intended recipients, meanwhile,
Uganda National Oil Co. (UNOC) and 5% included 22 commercial and state-run banks
to Tanzania Petroleum Development Corp. that were expected to provide part of the financ-
(TPDC). ing for EACOP. At least five of these banks –
The French company, which is serving as ANZ, BNP Paribas, Crédit Agricole, Société
operator of the group, has been saying that Générale and UniCredit – subsequently aban-
it expects the cost of the pipeline to be about doned plans to support the pipeline project. At
$3.55bn – and that it would cover the cost with the same time, many of the others are facing
$2.5bn in debt financing and $1bn in contri- pressure from shareholders and environmen-
butions from EACOP’s member companies. tal activist groups to curtail lending to projects
In May, though, it acknowledged that the cost involving fossil fuels.
estimate had been raised to $5bn, with $3bn Similar pressure is being applied to the pri-
to come from debt financing and $2bn from mary addressees of the letter – ICBC (China),
shareholders. the Ugandan branch of South Africa’s Standard
TotalEnergies has not had much to say pub- Bank Group and Sumitomo Mitsui (Japan), It appears that
licly about the reasons for this change. However, all of which have agreed to act as transactional
it appears that the company anticipates having advisers for TotalEnergies, CNOOC and the TotalEnergies may
to borrow a larger sum because a number of governments of Uganda and Tanzania on
prominent financial institutions are declining EACOP. Standard Bank in particular has been have to borrow
its requests for loans and other financial services. criticised by environmental groups for signing
So far, seven commercial banks – ANZ on to the project, largely because of its extensive a larger sum for
(Australia/New Zealand), Barclays (UK), BNP track record of financing coal projects but also EACOP because of
Paribas (France), Crédit Agricole (France), because its lending policy does not put fossil
Credit Suisse (Switzerland), Société Générale fuels beyond the pale. lenders’ concerns
(France) and UniCredit (Italy) – have decided
against providing financing for EACOP. The More obstacles looming? about climate
British export credit agency UK Export Finance At this point, Standard Bank Group does not
(UKEF) has also turned down a request for appear to be contemplating an exit from EACOP. issues
funding, while the French insurance company It did promise in May 2021 that it would roll
AXA announced in July that it would not pro- out a new climate policy in the first half of 2022,
vide coverage for the project. during its next reporting cycle. Presumably the
new version will be more restrictive than the
Climate considerations bank’s existing policy, which imposes certain
All of these financial institutions have cited restrictions on lending for oil, gas and coal
climate considerations as the reason for their projects and requiring borrowers to minimise
decision. or reduce greenhouse gas (GHG) emissions.
Specifically, they have described EACOP as However, it will probably not have any retroac-
incompatible with their commitment to fund tive components; that is, it will not require the
only projects that are in line with the Paris bank to abandon any commitments that it has
Agreement, which aims to keep the rise in aver- already made.
age global temperatures to 2 degrees centigrade Even so, recent developments such as
or less by the end of the 21st century. TotalEnergies’ higher estimate for pipeline
Some of the financial institutions in question construction costs and AXA’s decision to stay
have faced outside pressure. In early March, out of the project should serve as notice that
more than 260 non-governmental organisations Uganda will face further obstacles as it attempts
(NGOs) published an open letter that urged to develop and monetise its oil resources. It defi-
financial institutions not to provide any funding nitely moved a step closer to this goal with the
for the construction of the pipeline. The signa- signing of the EACOP agreements earlier this
tories included well-known international NGOs year, but it has yet to reach its target. Moreover,
such as Greenpeace and Friends of the Earth, as the target could recede further if climate con-
well as more narrowly focused organisations cerns continue to complicate financing. ™

Week 34 25•August•2021 www. NEWSBASE .com P5