Top officials from Uganda’s Ministry of Energy announced on Friday that the sponsors of the East African Crude Oil Pipeline (EACOP) are seeking $1.8 billion in funding. They expect this amount to be provided by various Chinese lenders and two African banks. According to Ruth Nankabirwa, the Ugandan Energy Minister, $1.8 billion is required for the remaining debt financing. She confirmed that the project’s equity financing has already been fully paid for by the four shareholders involved.
Irene Batebe, the Permanent Secretary of the Ministry of Energy, mentioned that a significant portion of the required funds would come from major Chinese banks, Afriexim Bank, and other African funders whose identities cannot be revealed at this time. Sources familiar with the project suggested that China Exim Bank, a frequent lender for Uganda’s infrastructure projects, is expected to be among the financiers providing loans for the $5 billion pipeline project. The pipeline will transport Uganda’s oil over a distance of 1,443 kilometers from the Lake Albert oilfields to the port of Tanga in Tanzania.
Experts in the industry believe that the involvement of numerous Chinese companies in securing contracts for upstream production and EACOP implies that China is the primary source of loans. Beijing is leveraging this influence to ensure its companies secure business opportunities. In the context of the project’s ownership structure, French supermajor TotalEnergies is the lead investor with a 62 percent stake, while the Uganda National Oil Company and Tanzania Petroleum Development Corporation each hold a 15 percent stake. The China National Offshore Oil Corporation possesses an eight percent stake.
The financing for EACOP comprises 60 percent debt and 40 percent equity, with estimated debt ranging between $2 and $3 billion, according to TotalEnergies’ shareholder meeting records from 2022. Speakers at the recent 10th East African Petroleum Conference and Exhibition expressed confidence in the success of the cross-border project, asserting that no pipeline initiative has ever failed due to financing. NJ Ayuk, the executive chairman of the African Energy Chamber, defended Africa’s utilization of its mineral, oil, and gas resources for the energy transition. Ayuk argued against the West’s insistence on Africa abandoning fossil fuel projects for decarbonization, claiming that such a move would hinder industrialization programs and condemn populations to poverty.
The identity of the African banks involved, including whether Standard/Stanbic Bank is one of them, remains unconfirmed. Standard/Stanbic Bank is a significant financial institution on the continent and is serving as one of the transaction advisers alongside Japan’s Sumitomo Mitsui Banking Corporation and the Industrial and Commercial Bank of China (ICBC). Reports within the project finance industry suggest that ICBC, a major Chinese bank and shareholder in Standard Bank of South Africa, may have transferred an estimated $1–2 billion to Standard Bank to bolster the lender’s capital for lending to EACOP. However, transaction advisors cannot verify these reports.
Stanbic Bank Uganda’s head of corporate communications, Kenneth Agutamba, declined to comment on transactional matters related to the project due to client confidentiality provisions. The bank stated that its participation in EACOP’s funding is subject to its credit approval process, which includes evaluating environmental and social due diligence assessments and meeting the requirements of the Equator Principles. The bank explained that an independent environmental and social consultant recently conducted an update to the due diligence report, and its findings are currently under review by internal experts. Stanbic/Standard Bank emphasized that comprehensive due diligence is essential in project finance deals, covering legal, technical, security, market, reserves, environmental, social, and other factors to inform decision-making processes.
