Report: East Africa pipeline ‘breaches banking principles’

The Associated Press

15:18 JST, July 5, 2022

A controversial oil project that would connect oilfields in a Ugandan National Park to a port in Tanzania breaches global environmental guidelines for banks, according to a new nonprofit report Tuesday.

The 1443-kilometer East Africa Crude Oil Pipeline (EACOP), planned by French oil giant TotalEnergies and the China National Offshore Oil Corporation has been mired in allegations of human rights abuses and environmental hazard. The 230,000 barrels of oil produced daily will emit 34 million tons of carbon dioxide annually, according to Ugandan nonprofit the Africa Institute for Energy Governance. Construction will take three years, once a final decision has been taken.

At least 20 banks and eight insurers have ruled themselves out of the project, many coming under pressure from environmental groups. South Africa’s Standard Bank and the Japanese Sumitomo Mitsui Banking Corporation (SMBC) are financial advisers and lead debt arrangers. The UK’s Standard Chartered bank is also considering financing it.

All three signed up to the benchmark Equator Principles, voluntary environmental and human rights guidelines for financing infrastructure projects. A report by the non-governmental organization Inclusive Development International, shared exclusively with The Associated Press, says the project repeatedly breaches these principles and banks would violate them too if they go ahead. Banks are forbidden from financing non-compliant projects. But the scheme is powerless to eject members that do.

Oil wells will be drilled within Murchison Falls National Park, western Uganda. Here the Nile plummets some 40 meters through a gap just 6 meters wide, the surrounding wilderness home to hippos, egrets, giraffes and antelope. The pipeline would then pass through seven forest reserves and two game parks, running alongside Lake Victoria, a source of fresh water for 40 million people.

“An oil spill could prove disastrous for the millions that rely on the lake’s watershed for drinking water and food production,” the environmental campaign group 350.org has warned.

The report says the risk of oil spills breaches an Equator Principle requiring minimal environmental impact. A review of the plans by the nonprofit E-Tech International, which advises communities affected by infrastructure projects, found best practice was not followed.

“EACOP oil spills will occur over the lifetime of the project,” the review concluded.

The pipeline’s environmental assessment doesn’t contain a robust oil spill plan, the report’s authors contend, a further breach of the Principles. The pipeline will also traverse an earthquake zone — the Great Rift Valley — the Inclusive Development International report warns.

TotalEnergies said the pipeline’s state of the art design will ensure safety for decades.

The oil has a high wax content, solidifying at temperatures below 33 degrees Celsius which would stop oil from spreading as liquid, the company said. Emergency plans are being prepared, the company insisted. Summer temperatures can hit 40 degrees Celsius in Uganda.

Human rights standards have also allegedly been broken, according to the report. At least four letters from UN Special Rapporteurs on Human Rights, sent to the Ugandan president and TotalEnergies’ CEO Patrick Pouyanné over two years, detail “various acts of harassment and intimidation” against protesting Ugandans. Numerous activists and a journalist have allegedly been intimidated, forced into hiding, arrested and interrogated.

The Equator Principles are “not being met with regard to the risks facing community members that express criticism,” the report finds.

TotalEnergies said it was unaware of threats emanating from its own staff. The company said it is “vocal about the need” for Ugandan security forces to respect human rights, and had written to the Ugandan president to share its concerns.

“TotalEnergies does not tolerate any threats or attacks against those who peacefully defend and promote human rights,” the statement read.

The Principles have also been violated by a lack of community engagement “free of manipulation, interference, or coercion, or intimidation”, according to the analysis.

More than 120,000 people will lose land to make way for the project, an evaluation by environmental campaign group Friends of the Earth found. There must be “free, prior and informed” consultation with people whose lives may be changed, according to the Principles.

But the report found these requirements were not “sufficiently met”.

The project has “systematically failed” to consult and disclose accessible information, it said.

TotalEnergies said only 13,300 people would be economically impacted across Uganda and Tanzania. Since 2017, meetings have reached over 200,000 affected individuals along the route, the oil major said.

Finally, the project violates standards on land acquisition and resettlement, the report finds. Compensation processes “exacerbated, rather than mitigated” negative impacts, impoverishing villagers who lost access to farmland and faced long delays awaiting compensation.

TotalEnergies said it had already begun paying compensation. The process abides by local laws and is in compliance with the Principles, the company insisted.

Equator Principles chair Amit Puri said each member was “individually responsible for its own internal procedures” to comply. He added that The Equator Principles do not have the authority to respond to concerns about breaching them.

Mr Puri is global head of environmental risk at Standard Chartered, one of the banks that the report says would allegedly be breaching the guidelines by financing the pipeline.

Standard Chartered itself and SMBC declined to comment. The China National Offshore Oil Corporation did not respond to numerous requests for a statement.

Standard Bank said its due diligence on funding the project was being assessed, but no final decision has been made. The decision’s subject to a full assessment of climate change strategies, the bank said, while “full compliance” with the Equator Principles was needed to fund the project.

Despite environmental and human rights concerns, the campaign to stop the pipeline is “unrealistic”, said Angelo Izama, of Ugandan think tank Fanaka Kwa Wote.

“Uganda is being thrust into this role as a poster child for climate damage, and it’s really unfair,” he said.

It amounted to a “dismissal of the national interests of Uganda”.

Ugandan oil officials declined to comment.

But President Yoweri Museveni has said oil wealth can lift millions out of poverty, while other government officials hope Uganda can become a middle-income country.

Efforts to stop the pipeline have left some dismayed at what they see as concerted efforts to sabotage the project.

“TotalEnergies and CNOOC … have the financial muscle and technical know-how to deliver a world-class project” wrote Elison Karuhanga, a prominent oil attorney, in Uganda’s Daily Monitor newspaper.