The East African Crude Oil Pipeline (EACOP), a joint project between Tanzania, Uganda, and major external stakeholders TotalEnergies and China National Offshore Oil Corporation (CNOOC), is facing significant financing hurdles.
Originally set up to transport oil from Uganda’s Lake Albert reserves to Tanzania’s Tanga port, this $5 billion project has seen its two primary foreign investors step in with additional funding due to debt-financing constraints.
The project has attracted criticism from environmental groups and parts of the international community, citing risks to local ecosystems and potential displacement of communities along the pipeline’s route.
As a result, six major Western banks, including BNP Paribas, Société Générale, and Barclays, declined to finance the project.
In response to these financing challenges, Uganda’s Minister of Energy and Mineral Development, Ruth Nankabirwa, traveled to Beijing to explore additional funding avenues with Chinese financiers, whom she described as crucial for the project’s success.
She explained that significant restructuring was required to secure funding, shifting the project’s funding model from the original 60% debt and 40% equity to a nearly equal debt-equity balance, with equity now reaching approximately 52%.
“As we continue seeking funds, the external debt portion decreases,” Nankabirwa stated, emphasizing shareholders’ commitment to ensure the project progresses.
Uganda has committed an additional $45 million to the project, with Tanzania expected to match this. TotalEnergies has also pledged an additional $400 million, reaffirming its commitment despite the financial hurdles.
