EACOP Loan Has Been Secured

All the debt (loans) needed for the East African Crude Oil Pipeline (EACOP) has been sourced and signed off, according to our reliable sources.

The acquisition of the last batch of debt from China was the last major hurdle for the construction of the world’s longest underground heated crude oil pipeline.

Now, attention fully shifts to mobilising the equipment needed for the pipeline, with projections of Uganda achieving first oil at some point in 2027.

According to our sources, China signed off the debt in late December 2024, although Uganda’s government remains tight-lipped over the details of the transaction.

On January 24, 2025 a series of agreements were filed in the United Kingdom’s registry of companies, where the EACOP Company Ltd is domiciled, to reflect a material change in the company’s finances.

The newly-acquired loan for the EACOP is lower than what Uganda was looking for a year ago though.

Ruth Nankabirwa, the Minister of Energy and Mineral Development, told us a year ago that Uganda was looking for about $1.2 billion in debt for the crude oil pipeline.

We now understand that the amount slipped to below a billion dollars after the shareholders of the project agreed to carry more financial burden of the project.

The Standard Group of South Africa, the parent company of Stanbic bank Uganda, acted as the intercreditor agent for the debt from the Chinese government.

The EACOP – a 1,445km project between Hoima in Uganda and Tanga in southern Tanzania – is estimated to cost about $4bn.

The shareholders of the project – TotalEnergies of France, China’s CNOOC, the Uganda National Oil Company, and Tanzania Petroleum Development Corporation – are now expected to carry the biggest weight of the financial bill after challenges in accessing the debt they were initially looking for.

The process to acquire the debt, which started more than three years ago, has faced a number of barriers, none bigger than the criticism from environment activists.

Many international financial institutions backed away from the EACOP after climate activists were alarmed by the manner in which people were displaced to pave way for the construction of the project; troubled by the risk of pristine vegetation being wiped out; and disturbed by the threat of toxic carbon emissions when the project is commissioned.

The activists wrote a series of letters to potential lenders and in some instances protested outside their offices as part of their pressure to block any funds towards the pipeline.

The shareholders of the pipeline say the activists are simply alarmists peddling lies.

The criticism from the climate activists became a double-edged sword for Uganda’s ambitions to attract credit for the project: on the one hand potential financial institutions steered clear of the project, and on the other the remaining financiers pushed a hard bargain by demanding for more incentives before putting pen to paper.

With negotiations deadlocked, some experts worried that the delay to nail down the debt would eat into the profit of the project and, therefore, there was a need for a remodelling of the project’s financial matrix.

Irene Bateebe, the permanent secretary in the ministry of Energy and Mineral Development, told us last year that the risk was minimal. She said the government worked with a delta, and not a single spot price.

She added that Uganda’s oil price was modelled between $50 and $100 barrel, and that the project is still attractive based on the prevailing oil prices.

Nevertheless, the delay in concluding the financial closure for the EACOP led to some suggestions of the kind of adjustments that the project needed.

For example, there was a proposal for the biggest shareholder of the project – TotalEnergies – to offer bridge financing to the project to allow work to move on as the negotiators of the project found ways to break the deadlock.

That proposal didn’t make much headway.

The biggest change, however, came with the debt-to-equity ratio of financing the EACOP. Initially the project was to be funded with debt of 60 per cent and equity of 40 per cent. Now, the equity has been raised to 52 per cent and the debt slumped to 48 per cent.

Uganda has agreed to borrow money to meet part of its quota of financing for the EACOP.

So far, nearly all the land for the right of way for the pipeline has been secured. Also, under 1,000 kilometers of pipes are said to be ready for laying.