The Standard Bank Group has revealed that both Uganda and Tanzania have agreed to allow funding for the construction of a $4 billion crude oil pipeline.
This new development comes after Tanzania resolved a dispute with certain Chinese financiers on an unrelated issue.
Kenny Fihla, the CEO of the bank’s commercial and investment banking division pointed out, “The crude oil pipeline projects was delayed because of the historical dispute between the Tanzanian government and some of the Chinese funders, which had nothing to do with the project, but it needed to be resolved to enable an agreement on the pipeline.We have been informed that the agreement has been reached.”
The lender is investing close to $100 million in the project and it had banked on an agreement between project developer TotalEnergies SE, China’s CNOOC Ltd., and the governments of Uganda and Tanzania regarding the financing structure.
Last week, Fihla added that the bank was awaiting the completion of an environmental and social impact assessment study.
“The data-gathering process and response is close to finality .If we’re comfortable with that, we’ll say yes, but if we’re uncomfortable with that, we’ll either require further studies or we’ll say no.”
The construction of the major fossil fuel project has sparked a debate around economic development and environmental protection in one of the region’s most vulnerable to climate change.
Environmental groups have raised concerns about potential damage to the habitats of endangered wildlife species and displacement of at least 118,000 people. As many as 260 civil society organizations have asked lenders, including Standard Bank, not to take part in the project.
The 1,443-kilometer (897-mile) pipeline should start transporting oil in 2025 and ferry 246,000 barrels daily at peak, according to a project website. TotalEnergies has a 62% stake in the planned conduit that once complete will be the world’s longest heated pipeline.
State-owned Tanzania Petroleum Development Corp. and Uganda National Oil Co. each have a 15% interest, while the rest is owned by CNOOC. The project will be funded on a 40:60 equity-debt ratio, according to UNOC.