Total’s suspension of the East Africa Crude Oil Pipeline is a chance for Standard Bank and others to think again

BankTrack discusses the controversial project in Uganda and Tanzania

Plans for a 1,443 kilometre heated crude oil pipeline from Uganda’s oil fields to Tanzania’s coast have hit the rocks, with Total SA confirming on Thursday last week that it has stopped work on the East Africa Crude Oil Pipeline (EACOP) project until further notice. The announcement followed news that Tullow Oil, the London-listed oil exploration company, had reportedly been forced to shelve its plans to sell the majority of its 33.33% stake in its Ugandan oil projects to Total and China National Offshore Oil Corporation (CNOOC) due to a disagreement with the Ugandan government over tax.
The news comes only a few weeks after reports that Stanbic Bank Uganda, a subsidiary of South Africa’s Standard Bank, said the country “will be able to get the money it needs” for the project, and that forming a syndicate to provide the $2.5bn in project finance loans needed for the pipeline “is not a problem”.
BankTrack and several other civil society groups, many from Uganda and neighbouring countries, wrote to Stanbic and Standard Bank, alongside Sumitomo Mitsui Banking Corporation (SMBC) of Japan, also a lead arranger of the EACOP project loan, in May to raise substantial concerns about the threats posed by the project to water, endangered species and local people’s livelihoods, as well as its climate impacts. Standard Bank’s response in July did not address any of these material concerns, and stressed that “no decision has been made at this stage to provide lending to this project”.
However, statements to the press suggest Standard Bank is eager to finance the pipeline. Total’s suspension gives the bank the chance to pause and think again. As the current chair of the Equator Principles, the banking sector’s rules for managing environmental and social risks in project finance, Standard Bank would be well advised to avoid association with such a controversial project.

Ugandan ESIA “not fit for purpose”; Tanzanian ESIA missing

The Environmental and Social Impact Assessment (ESIA) for the Ugandan portion of the EACOP pipeline was published earlier this year for public consultation, but it is fair to say it has not been well received. The Africa Institute for Energy Governance (AFIEGO), a Ugandan public policy research organisation, has called on Uganda’s National Environmental Management Authority (NEMA) and Ugandan citizens to reject it. AFIEGO’s analysis of the gaps in the document points to a failure to adequately consider how spills from the pipeline might affect local communities’ access to drinking water, as well as a failure to provide adequate measures to mitigate impacts on 11 endangered animal and plant species that could be affected, including chimpanzees, hippopotamus and the crested crane, Uganda’s national bird.
Further, an independent quality review of the document by the Netherlands Commission for Environmental Assessment, carried out at NEMA’s behest, concluded that “the ESIA report does not yet provide enough information for sound decision making” and overall is “not fit for purpose”.The Dutch assessment concludes that the ESIA’s technical summary presents positive impacts in a way that is “(far too) rosy”, while “negative impacts are only mentioned in a very superficial and reassuring way” – in short, it is more like a work of advertising. Meanwhile, the ESIA itself makes exaggerated claims about jobs and other economic benefits, seems to ignore significant potential negative impacts on wetlands, and makes unsubstantiated claims of negligible impacts on land ownership, according to the analysis. Further, it points out, the ESIA’s treatment of EACOP’s energy and carbon impacts is unrealistic, insufficient, and ignores the overall impacts of the oil projects of which the pipeline is a part.
As for the ESIA for the Tanzanian portion of the pipeline (roughly 80% of its length), none has yet been published. If EACOP does proceed, Standard Bank and other financiers will be under pressure to show how it complies with the Equator Principles; yet with an ESIA that covers only 20% of the project’s length, and which has been rejected even by the government’s own advisers, the basics are not yet in place.

There are concerns over corrupt practices and intimidation

In our May letter, we warned that large-scale land acquisition and displacement associated with the pipeline presented risks of human rights abuses. Now, news reports have highlighted issues with the pipeline’s mapping process, and allegations including project-affected people being “harassed and forced to sign different forms without clear explanation” and “told to fill the valuation forms using a pencil, and then sign in ink”.
Local groups have also pointed to problems with the land acquisition plan for the pipeline, under which land users who lack title for their land will only be compensated for their crops rather than for the land, which AFIEGO has called “unfair, unconstitutional and against international best practices”.

Climate impacts could be equivalent to a country the size of Denmark

Alongside its local impacts, the project will bring an expected 216,000 barrels of heavy, waxy crude oil a day to the global market. Based on data from the ESIA, local civil society groups estimate that the “indirect emissions of the EACOP project would be at least 34.3 million metric tons of CO2eq emissions per year – 2000 times higher than the operational CO2eq emissions assessed in Section 8.22 of the ESIA.””

If accurate, this means the annual emissions from EACOP will dwarf the current annual emissions of its two host countries combined, and will be roughly equivalent to the carbon emissions of Denmark (33.5 million tonnes).
Total’s suspension of the pipeline project gives Standard Bank, SMBC and others time to reconsider whether they want to be responsible for facilitating a project that will lead to such massive emissions, as well as posing risks to endangered species and the drinking water and livelihoods of local people. With the Equator Principles now undergoing a high-profile revision, Standard Bank has the responsibility to avoid bringing the standards further into disrepute.

Ryan Brightwell is Researcher and Editor at campaign group and NGO BankTrack