TOTAL Can Do Better than the East African Crude Oil Pipeline(EACOP)-OPINION - Africa’s premier report on the oil, gas and energy landscape.

TOTAL Can Do Better than the East African Crude Oil Pipeline(EACOP)-OPINION

By Gerrard Kreeft

Will the East African Crude Oil Pipeline (EACOP) ever be constructed? Public dissent has been mounting and financial hurdles have yet to be resolved. Continued delays only make the completion of this on-going saga more uncertain.

The Project

EACOP is being constructed in parallel with the Tilgenga and Kingfisher upstream development projects. Tilenga, operated by TOTALEnergies, will produce some 200,000 Barrels of Oil per Day (BOPD) and Kingfisher, operated by CNOOC(China National Offshore Oil Corporation) will produce some 40,000BOPD.  Each development will consist of a Central Processing Facility (CPF) to separate and treat the oil, water and gas produced by the wells.  Kingfisher will have 4 well pads and a CPF and  Tilenga has 31 well pads. The Ugandan Refinery project has a right of first call to 60,000BOPD, with the remainder of the oil being exported via EACOP.

EACOP will have a length of 1,443 kilometres  and export crude oil from Kabaale – Hoima in Uganda to the Chongoleani peninsula near Tanga port in Tanzania.  At peak capacity it will handle 246,000BOPD.

The project dates its origins back to 2004 when Tullow Oil gained three exploration blocks following its acquisition of Energy Africa. In April 2020 Tullow sold all of its oil assets to TOTALEnergies for $575Million in order to reduce its debt and strengthen its balance sheet. TOTALEnergies’ vision was simple: purchasing Tullow Oil assets for next-to- nothing made it a no-brainer to move on to developing Tilenga and together with CNOOC, Kingfisher and EACOP.

The Next Hurdle

Time and events on the ground have proven difficult.

For example, the European Parliament’s resolution of September 2022, condemning human rights in Uganda and Tanzania, linked to investments in fossil fuel projects, have proven embarrassing to the French oil giant.

French President Macron has also indicated that France does not support this project.

Various interest groups have been extremely vocal and successful in their stand against the project:

The Climate Accountability Institute(CAI) have charged that during the 25-year lifespan of the project associated  oil emissions would be more than double those of Uganda and Tanzania in 2020.

Omar Elmawi, coordinator of the Stop EACOP campaign, said: “EACOP and the associated oilfields in Uganda are a climate bomb that is being camouflaged us as an economic enabler to Uganda and Tanzania. It is for the benefit of people, nature and climate to stop this project.”

Stop EACOP Campaigners argue that, as the world’s longest heated oil pipeline which will run through many populated areas, it will contribute to poor social outcomes for those displaced. They also mention the significant risk to nature and biodiversity, as the pipeline runs through large areas of savannah, zones of high biodiversity value, mangroves, coastal waters, and protected areas, before arriving at the coast where an oil spill could be dire.

According to Elmawi, TOTALEnergies is still in search of $3Billion in order to complete the financing of EACOP. To date, he says, 24 banks, 18 insurance companies, and export credit agencies in France, Germany, Italy and the UK have refused supporting this project. “Already the project has suffered a three year delay”, the STOP EACOP campaigner claims.

How much delay can TOTALEnergies withstand before it walks away from the project and declare the necessary impairment charges? The delay will also ensure that TOTALEnergies’ financial team will be re-evaluating their energy portfolio. Think back to the summer of 2020 when TOTALEnergies  announced a $7Billion impairment charge for two Canadian oil sands projects. This might have seemed like an innocuous move, merely an acknowledgement that the projects hadn’t worked out as planned.

Yet it opened a Pandora’s box that could change the way the industry thinks about its core business model—and point the way towards a new path to financial success in the energy sector.

While it wrote off some weak assets, it did something else: TOTALEnergies began to sketch a blueprint for how to transition an oil company into an energy company.

Patrick Pouyanné, TOTALEnergies’ chairman and chief executive, said that by 2030 the company “will grow by one-third, roughly from 3Million barrels of oil equivalent per day (BOEPD) to 4Million BOEPD, half from LNG, half from electricity, mainly from renewables.” This was the first time that any major energy company had translated its renewable energy portfolio into barrels of oil equivalent. So, at the same time that the company  slashed “proved” oil and gas from its books, it added renewable power as a new form of reserves.

TOTALEnergies’ emphasis is on ensuring that its LNG portfolio and its renewables continue to grow to ensure shareholder income. Pesky oil projects which highlight climate opposition and encourage environmental activism, both local and international, are not the type of projects which promote TOTALEnergies’ shareholder stability.

Finally, COP27, the next UN Climate Conference, to be held in November 2022 in Egypt, will no doubt also become a rallying cry for stopping EACOP. Could EACOP become an African stranded asset much like the Keystone Oil Pipeline in the USA?

 Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA(Institute for Energy Economics and Financial Analysis). His book the 10 commandments of the Energy Transition is on sale at https://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

 

 

 

 

 

 

 

 

 

 

 

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