At the just concluded 7th Uganda Oil and Gas Summit, where investments in fossil fuels projects was discussed, the Managing Director of East African Crude Oil Pipeline Limited (EACOP) renewed commitments and assurances that the crude oil export pipeline project is compliant with international human rights, environmental and social requirements standards even as EACOP legal shareholding faces a challenge in Europe.
Europe is now focusing on green and climate friendly projects, pushing many countries to shift without offering viable alternatives.
As if it was not clear, the EACOP for now is forging ahead, with or without the “approval” of the European Union and its institutions, namely the EU Parliament. The crude oil export pipeline is one of the major projects in East Africa in recent times.
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On September 14, 2022, the EU Parliament issued a Joint Motion for a Resolution on violations of human rights in Uganda and Tanzania linked to investments in fossil fuels projects. The motion enumerated a number of accusations disguised as concerns regarding the alleged violation of human rights, particularly in Uganda where human rights defenders and NGOs have not been allowed on the project site and arrests of journalists and activists as well.
Other accusations included that the environmental and social impact assessments were not done accurately as they excluded the reality of a number of oil spills that would occur over the lifetime of the project. This is one of the reasons Europe is pushing for what it calls green and climate friendly projects.
That the project would endanger nature reserves and habitats and that an estimated number of 118,000 people would be adversely affected by the project through the destruction of their homes so as to make way for the construction of the pipeline and that the said people would not have adequate compensation. The list continues and I share it in this article.
A reminder of the EACOP legal shareholding structure namely, Total Energies owns a 62 per cent stake in the company as majority shareholder, Uganda National Oil Company and Tanzania Petroleum Development Corporation own a 15 per cent stake each while CNOOC Limited (the largest producer of offshore crude oil and natural gas in China) owns 8 per cent stake in the company.
The EACOP Limited is a registered company in the UK, but fiscally domiciled in Uganda and paying all its taxes and duties in both Uganda and Tanzania. Through this vehicle will be the design, operationalisation and financing of the crude oil export pipeline of 1,443km that will transport Uganda’s crude oil from Kabaale – Hoima in Uganda to the Chongoleani peninsula near Tanga port in Tanzania. It will have a peak capacity of 246,000 bbls/day.
Whilst we have heard a considerable amount in the last weeks on the risks, it is important to highlight the benefits as well which are that the EACOP project will have US$ 3.5 billion invested in the construction phase and approximately 10,000 direct jobs will be created as a result of the crude oil export pipeline. Green and climate friendly projects ignore some of these facts, especially when it comes to African projects.
Furthermore, in preparation for projects like EACOP both Tanzania and Uganda have reinforced their local content laws particularly in the oil, gas and mining sectors which means there will be a lot of opportunities for local companies to supply goods and services and opportunities for transfer of skills, knowledge and technology through joint ventures with international companies.
Since taxes will be paid domestically in Uganda and Tanzania, the GDP will improve and grow. There will be increased logistic activities of the Tanga port and there will be a sizeable investment of US$ 600 million in the port development including supporting facilities, storage facilities, etc.
It is therefore understandable the EU Parliament Joint Statement created quite a stir for both governments of Uganda and Tanzania who issued statements to the effect that the EU Parliament was misguided and that the project was in compliance with laws and regulations in both respective countries and also observed international standards.
However, the underlying message particularly from the government of Uganda is that it is easy for EU Members of Parliament who have never lived in Africa, beyond the safari that they once did for 2 weeks, to sit on their high horse and judge the negative impacts of the project and completely discard the clear benefits that the project would bring to these 2 nations that are developing and struggling to alleviate their people from poverty.
More importantly though, a clear signal was sent to the EU Parliament that the colonial days are over and that meddling in affairs and interfering with matters that are of the exclusive sovereign remit of the host countries, Uganda and Tanzania, is simply not tolerated.
Following the EU Parliament’s action, Total Energies is to appear before the Parliament for a hearing and answer queries that the members of parliament will have. That coupled with the fact that Total has an ongoing court case in France regarding an allegation of its failure to put in place an adequate vigilance plan covering health, safety, environment, and human rights risks as required by French law, related to the same EACOP project, it will be interesting to see whether or not Total Energies might drop out of the project at the risk of being exposed to a breach of contract claims by the other Parties to the venture. Total Energies controls EACOP legal shareholding since it has the majority.
However, it may be a small price to pay amid the increasing pressure in France and Europe for green and climate-friendly projects. Worldwide, financiers are avoiding investments in fossil fuels projects and looking for what is hailed as green investments.
For now, the show must go on as both the governments of Tanzania and Uganda have clearly stated, and the project will be realised with or without Total. This type of project and others on the continent, the interference we have seen made by institutions such as the EU Parliament, the World Bank and the International Monetary Fund is a reminder that Africa needs to work towards engaging and collaborating with different partners – partners who do not impose conditions and interference with sovereignty and internal matters.
Partners who might better understand Africa’s need to develop and its priorities and not hold it to the same standards as countries’ that have very different realities. More importantly, Africa needs to work much faster towards achieving self-reliance.
With the ambitious infrastructure and energy projects that many governments will look to realise in the coming years, it might become more expensive to uphold historical relationships with development partners with whom perspectives and priorities are becoming increasingly divergent. EACOP legal shareholding may change depending on the outcome of the grilling by the EU parliament over the project.
You can read more on the joint motion for a resolution on violations of human rights in Uganda and Tanzania linked to investments in fossil fuels projects here.
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Author: Amne Suedi is the Managing Director of Shikana Group, an investment and advisory company that counsels global foreign investors investing in Tanzania and EAC markets. For more information contact amnesuedi@shikanagroup.com
