More than a year since Chinese financiers and the developer of the East African Crude Oil Pipeline (Eacop) entered into negotiations to finance the project’s debt, a massive hole remains in the financing structure as loans amounting to about $3 billion have not been disbursed. are inevitable, forcing shareholders in emergency measures to raise additional capital funds.
When new calls for money for the project came in last month, Eacop shareholders dug deep to raise money and prevent the project from stalling – a situation that would affect the timelines for producing and exporting crude oil from Uganda’s oil fields in the Lake Albert region.
TotalEnergies executives said last month that physical work on the project was 33 percent complete at the end of April. The thermal insulation of the line pipes, the connection and laying of the line pipes and the construction of the pumping stations will all be done before the first oil target at the end of next year.
With the $2 billion in equity funds raised by Eacop shareholders running out, the project’s developers face a cash crunch to fill the funding gap, which threatens to see ongoing physical works on the project stalled until July 1. officials said.
The Uganda National Oil Company (Unoc) – the state-owned firm that oversees Uganda’s commercial interests in oil and gas projects – will this month inject another $35.38 million in response to the latest calls for cash coming from funding overdue debt, said CEO Proscovia Nabbanja.
“This money is to cover the gap between equity and debt financing,” she said, adding that all shareholders had already completed their equity contributions, but now had to close the financing crisis the project would be plunged into. due to the slow funding process. close debt financing.
“We’ve depleted the capital funds already paid in, and where the project is now, we can’t stop [works]. So every shareholder has to come up with money to cover the gap while we wait for the financial closure of the debt,” Ms Nabbanja explained.
Eacop’s shareholders are TotalEnergies, which owns 62 percent of the shares, Unoc (15 percent) held on behalf of the government of Uganda, and the Tanzania Petroleum Development Corporation with 15 percent of the shares on behalf of the government of Tanzania. while CNOOC has 8 percent of the shares.
The largest project costs for Eacop are for the engineering, procurement, construction and management contractor, supply of pipeline equipment including pipelines and pumping stations, and compensation of project-affected persons along the route from western Uganda to thong
For example, the total amount spent on financial compensation is approximately $39 million while the amount spent on compensating people affected by the project in nature amounts to about $62 million – including $25 million for building new homes – according to data of TotalEnergies.
The 1,443 km pipeline from Hoima in Uganda to Tanga Port in Tanzania is a $5 billion project expected to close financially this year, with the nearly $3 billion debt component of Eacop’s financing coming from Chinese financiers Exim Bank and Sinosure .
The project is financed with a 60:40 percent debt-equity ratio.
The Uganda oil project has been the target of international environmental activists and anti-fossil fuel groups, prompting major European and US banks to shun industry giant TotalEnergies’ approach to lenders to finance Eacop, forcing the project’s sponsors to turn to Beijing for credit.
But amid the criticism, TotalEnergies executives are eager to tie up the financing, get the oil out of the ground and start earning on their investment given current crude prices and rising global oil demand, but also wary of natural decline of oil reserves by 4 percent per year.
Addressing shareholders last month, TotalEnergies Chairman and Chief Executive Patrick Pouyanné said the International Energy Agency predicts demand of nearly 106 million barrels per day is on the horizon in 2028, compared with 102 million barrels per day in 2023.
“This growth can be explained, quite simply, by the growth of the world population, especially in the countries we call the ‘global south’, which legitimately aspire to a better standard of living and therefore need more a lot of energy,” he said.
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TotalEnergies explains that oil fields naturally decline by four percent a year, and so the question is not so much when oil demand will start to decline, but when it falls by more than four percent a year.
“However…at this stage, oil demand continues to grow, as does the world’s population,” he said, adding that although energy efficiency efforts have been realized, there has been a disconnect between oil demand growth and economic growth. . but the increase in demand is still present.
At the end of April this year, progress on the Eacop project in Uganda and Tanzania was 33 percent, according to the latest responses from TotalEnergies executives to their shareholders during the French supermajor’s Annual General Meeting on May 24.
Current works underway include the oil terminal and loading dock in Tanga, Tanzania, aboveground installations including pumping stations and main camps and production yards in Uganda and Tanzania, while pipeline installation begins this June, with four bundles of 100 km. of pipelines already delivered to Dar es Salaam.
The coating plant, which will thermally insulate the pipeline, has been completed and commissioned in March this year in Sojo Village, Nzenga District, Tabora Region in Tanzania and will insulate line pipes and pipe joints of 86,000 lines prior to installation along the track in Uganda and Tanzania.
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Image Source : www.theeastafrican.co.ke