Thursday, February 22, 2024

Uganda begins construction of oil pipeline using pipes from China amid growing opposition

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The shipment means construction of the 1,443km (896 miles) cross-border pipeline can begin. The project will transport crude oil from the Lake Albert field in northwestern Uganda to the Chongoleani Peninsula at Tanga Port on Tanzania’s Indian Ocean coast. Landlocked Uganda aims to supply its first oil to the international market by 2025.

Work has already begun on pumping stations, work camps and storage facilities along the EACOP route, as well as a coatings plant being built in Tanzania. After painting and welding, the first section of the pipe is expected to be installed in the middle of next year, according to the Uganda Petroleum Authority.

“This project represents a major inward investment in Uganda and Tanzania,” EACOP, the company overseeing the pipeline construction, said in a statement. “EACOP remains committed to implementing this project with the utmost responsibility and contributing to East Africa’s sustainable growth and prosperity.”

The project faces growing opposition from environmental and rights groups who argue that Uganda’s oil fields and pipeline threaten pristine ecosystems, biodiversity hotspots, water resources and community lands. ing. Due to pressure from activists based on the StopEACOP slogan, many banks and insurance companies in North America, Europe, and Japan withdrew from the project.

Uganda is now increasingly dependent on China, which plays a major role in the country’s oil industry, from financing projects to operating oil fields, drilling wells and building major infrastructure such as pipelines.

The pipeline’s financing is set at a 60:40 debt-to-equity ratio, with US$3 billion set aside as debt and the remaining US$2 billion to be financed through shareholder equity. Uganda’s Ministry of Energy and Mineral Development Permanent Secretary Irene Batebe said in September that Chinese financial institutions, such as the Export-Import Bank of China (Export-Import Bank) and the China Export Credit Insurance Corporation (Sinosure), had financed about half of the debt needed for Uganda’s construction. He said that he had agreed to contribute . pipeline.

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French oil multinational Total Energy controls 62 percent of the pipeline. Uganda National Oil Company owns 15%. Tanzania Petroleum Development Corporation owns 15%. China’s major oil company, China National Offshore Oil Corporation (CNOOC), will acquire an 8% stake. Last year, the issue came to the floor of the European Parliament, where lawmakers passed a resolution calling for the project to be halted, citing environmental and human rights concerns, and warning Total Energy not to support the project.

Uganda has an estimated 6.5 billion barrels of oil reserves, equivalent to 1.4 billion barrels of recoverable oil.

CNOOC operates the Kingfisher oil field located on the eastern shore of Lake Albert in Uganda. It is estimated that an estimated US$2 billion to US$3 billion will be invested in developing the field, which is expected to produce 40,000 barrels per day at its peak.

The other larger field is the Tirenga field operated by TotalEnergies, estimated to cost between US$4 billion and US$6 billion. It is expected to produce 190,000 barrels per day.

The arrival of the first 100km of pipes (5,600 18 meter sections) comes shortly after a Uganda Petroleum Authority delegation led by Director General Ernest Rubondo visited PCK Steel Pipe in Lianyungang City in October. “We are fully committed to ensuring timely delivery and high-quality pipes,” PCK President Xie Leshan said during the visit, which coincided with a forum on China’s Belt and Road Initiative.

The Uganda team also met with CNOOC International Chairman Liu Yongjie in Beijing to discuss the progress of the Kingfisher Oil Project. “This meeting marks an important development in the continued cooperation between Uganda and China in the oil and gas sector,” Rubondo said.

During the visit, the Ugandan delegation visited other Chinese companies that are contracted to work and service oil and gas projects in Uganda, including Offshore Oil Engineering Company, China Oilfield Services, Senertech, and China Petroleum Pipeline.・We also met with engineering companies.

EACOP will have the capacity to pump up to 230,000 barrels of crude oil per day from western Uganda to Tanzania’s Indian Ocean coast.

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Tim Zajonts, a researcher at the Center for International and Comparative Politics at South Africa’s Stellenbosch University, said earlier that the Ugandan government was unable to fund certain budget items and development projects after the World Bank reacted and decided to freeze new loans. He said he was under pressure to do so. Kampala’s anti-gay law was enacted in May.

“But I wouldn’t overemphasize that causality, at least in the case of oil pipelines, because Western financiers are pulling out of pipelines after protests from environmental and human rights groups. was clear long before the dispute with the World Bank,” Zajonts said. “China’s funding appears to be Kampala’s Plan B.”

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