Page 6 - DMEA Week 34 2021

DMEA COMMENTARY DMEA

New obstacles to oil

development in Uganda

Climate considerations appear to have forced

TotalEnergies to revamp its plans for financing EACOP

AFRICA THE first discovery of commercial oil reserves securing all the necessary authorisations for
in Uganda was made 15 years ago, when Tullow construction and for the establishment of the
Oil (UK/Ireland) reported that it had struck oil at EACOP consortium, which will build and
WHAT: a field near Lake Albert. At the time, Tullow was operate the pipeline, TotalEnergies is having to
The French major now optimistic that it might be able to begin devel- rethink its plan for funding the EACOP project.
says the pipeline will opment operations within a few years. Instead,
carry a price tag of $5bn, it found itself running into one problem after Revised financing plans
not $3.5bn. another. According to previous reports, equity in the pipe-
These problems did not disappear after line consortium will be split 37.5% to TotalEner-
WHY: Tullow brought two partners, China National gies, 37.5% to CNOOC, 15% to Uganda National
Cost estimates have Offshore Oil Corp. (CNOOC) and the French Oil Co. (UNOC) and 5% to Tanzania Petroleum
risen in the wake of company now known at TotalEnergies, on Development Corp. (TPDC).
commercial banks’ board. Even after it made the choice to unload The French company, which is serving as
decision not to fund part of its East African portfolio in 2019, tax operator of the group, has been saying that
EACOP because of disputes derailed its efforts to complete planned it expects the cost of the pipeline to be about
climate concerns. asset sales to TotalEnergies and CNOOC. It $3.55bn – and that it would cover the cost with
therefore had to start negotiations all over again $2.5bn in debt financing and $1bn in contri-
WHAT NEXT: before finally coming to terms with the French butions from EACOP’s member companies.
Standard Bank is not major in the spring of 2020. In May, though, it acknowledged that the cost
likely to exit the project, Since then, TotalEnergies has worked hard estimate had been raised to $5bn, with $3bn
but pressure from to push development forward. It has drawn to come from debt financing and $2bn from
environmental groups up new plans that call for production to begin shareholders.
may convince other in 2025, and it has made arrangements for the TotalEnergies has not had much to say pub-
lenders to back out. construction of the East Africa Crude Oil Pipe- licly about the reasons for this change. However,
line (EACOP), which will serve as its primary it appears that the company expects to have to
export route. The French company joined with borrow a larger sum because a number of prom-
CNOOC and the governments of Uganda and inent financial institutions are declining its
Tanzania in finalising a crucial set of agreements requests for loans and other financial services.
on this midstream project in April 2021. So far, seven commercial banks – ANZ (Aus-
In signing these agreements, TotalEnergies tralia/New Zealand), Barclays (UK), BNP Par-
has passed a major milestone. The company ibas (France), Crédit Agricole (France), Credit
needs the pipeline to make the development of Suisse (Switzerland), Société Générale (France)
the oilfields in western Uganda profitable. and UniCredit (Italy) – have decided against pro-
But now it faces another obstacle. After viding financing for EACOP. The British export

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