20th October 2023
Oily Money and Uganda
In 2006 oil was discovered in Uganda. Total ( French oil company) and CNOOC (Chinese oil company) bought the rights to extract this crude oil. However there has been considerable objection on many grounds. One of the key objections to the project is the statement issued by the International Energy Agency two years ago, that, to keep within the agreed net zero carbon emissions targets, no new oil and gas fields should be opened. This oil field is likely to produce over its lifetime 1.4 bn barrels – approximately equivalent to what France would consume in two years: not huge but not insignificant either – and would emit some 34 million tonnes of CO2 a year.
Another objection to the scheme is the threat to the environment. The oil field lies under both Lake Albert and the adjacent Murchinson Falls National Park, both of which are key areas maintaining important ecological habitats and in particular those of migratory fauna. Already test drilling has led to pollution of the lake, affecting fish stocks.
Once extracted, the plan is to heat the crude oil to 50C (to ensure it flows) and despatch it via a 900 mile pipeline through Uganda and Tanzania to a refinery at port of Tanga on the India Ocean. The pipeline could carry one 800 million barrels of oil a year. The East Africa Crude Oil Pipeline – EACOP – is a joint project comprising Total who have a 62% share, CNOOC with an 8% share, and TPDC (Tanzanian) and UNOC (Ugandan) each with a 15% share.
A further objection centres around the local people who have, and are being, forcibly removed from the land – both in the vicinity of the proposed oil field and along the route of the pipeline. So far some 60,000 Ugandan farmers and householders have been displaced. Often poor, their land used for growing food had been key in preventing extreme deprivation. Whilst they have received some financial compensation, it has often been inadequate and frequently taken 4 years to materialise.
The original construction timetable was for work to start in 2016 and to be completed within 3 years, but opposition has continued to delayed this. The project has, for example, been condemned by the European Parliament. As of August this year, the proposed start date is now 2024.
Total and CNOOC still need to raise $3 bn to finance the pipeline. Two banks, Standard Bank and ICBC, are still potential funders for the pipeline. Eight other international banks have declined to confirm their willingness, whilst twenty six (including Barclays and Deutsche Bank) have declined outright – https://www.stopeacop.net/banks-checklist.
In addition the project needs to underwriten by insurers. Whikst seven, including Lloyds of London and Chaucer, have not yet ruled out providing insurance, but a further twenty three insurers (including Zurich and Ava) have declined. https://www.stopeacop.net/insurers-checklist
Many campaign groups – Money Rebellion, Coal Action Network, Stop Eacop, Extinction Rebellion, Christian Climate Action, Stop Rosebank, and Just Stop Oil, are involved in opposing EACOP and most recently by targeting the would-be financiers of the project.
Oil projects, like this one in Uganda, are often presented as a way for poor countries to grow their economies and improve the wellbeing of their citizens. But in reality most of the money goes to the larger, overseas investors, and the number of local jobs created is small. The following abridge article on some of the economic alternatives comes from the StopEAOP web site.
“For example, Uganda’s tourism industry accounts for about 7% of the country’s gross domestic product and provides over 600,000 jobs. In contrast, EACOP is expected to create only 200-300 permanent jobs. Despite being a major economic sector and job creator in Uganda, tourism is often overlooked or underestimated, with only about 0.4 percent of the government budget allocated to it….The agriculture sector employs more people than any other sector: it is the backbone of the economy and fuels the country. Yet the small farmers who make this vital industry work are neglected. Support for the sector accounts for just under 3 percent of the government’s budget, yet the sector generates nearly 25 percent of the gross domestic product. There is a real opportunity to increase economic strength and resilience by investing in and supporting small-scale sustainable agriculture … Sustainable industries like renewable energy and electric transportation are already well established in the region, but with increased support from international investors, the sector has incredible potential [wind, solar, hydro and geothermal] … The clean energy sector will also benefit the agriculture sector, as decentralised renewable energy deployment can increase yields and incomes for small-scale farmers by improving solar irrigation and electrifying other agricultural activities such as cold storage and processing. In addition, investments in the clean energy sector create a significant number of permanent jobs in the manufacturing sector. For example, Kiira Motors, a state-owned vehicle manufacturer, will employ 14,000 Ugandans to produce 5,000 electric buses and other vehicles per year.” https://www.stopeacop.net/beyond-oil
Another concern is that poor countries like Uganda, often take on increased foreign debts in the expectation that future oil revenues will repay the interest, but delays in getting to the production stage can increase the debt burden and extra costs an reduce the returns, all increasing the country’s ongoing debt problem. Uganda spends more than 50% of its GDP financing foreign loans.
To read more about how debt is affecting wellbeing in Uganda read this Amnesty International report – https://www.amnesty.org/en/latest/campaigns/2023/09/building-resilience-public-debt-management-and-health-financing-in-ugand/
Debt Justice is leading the campaign, alongside other charities, to cancel the unfair burden of debt being borne by countries such as Uganda – https://debtjustice.org.uk/wp-content/uploads/2023/08/Debt-fossil-fuel-trap-report-2023.pdf
The Green Tau 