Kampala, Uganda – The East African Crude Oil Pipeline (EACOP) project is grappling with a significant financial shortfall, more than a year into negotiations with Chinese financiers. Despite earlier optimism, the $3 billion in debt financing necessary to progress remains elusive, compelling shareholders to seek emergency equity funding to prevent stalling.

Faced with fresh cash calls last month, EACOP shareholders, including TotalEnergies, Uganda National Oil Company (UNOC), and Tanzania Petroleum Development Corporation (TPDC), have had to mobilize additional funds. This urgent fundraising is critical to maintaining the project’s momentum and ensuring adherence to the timelines for crude oil production and export from Uganda’s Lake Albert region.

TotalEnergies executives reported that the project’s physical works had reached 33 percent completion as of the end of April. Key remaining tasks include insulating, stringing, and laying line pipes, as well as constructing pump stations, all of which are vital to meet the target of first oil by late next year.

UNOC’s CEO, Proscovia Nabbanja, confirmed that an additional $35.38 million will be injected this month to bridge the funding gap. “This money is to cover the gap between equity and debt financing,” she stated, emphasizing that despite shareholders having completed their equity contributions, the project cannot afford any interruptions in its current phase.

EACOP’s shareholders include TotalEnergies with a 62 percent stake, UNOC and TPDC each holding 15 percent, and CNOOC with an 8 percent share. The $5 billion project is financed through a 60:40 debt-equity ratio, with the debt component expected from Chinese financiers Exim Bank and Sinosure.

The largest expenditures for EACOP are associated with engineering, procurement, construction, and management contracts, pipeline equipment, and compensation for project-affected persons. To date, financial compensation has totalled approximately $39 million, with an additional $62 million allocated for in-kind compensation, including the construction of new houses.

The 1,443 km pipeline, extending from Hoima in Uganda to Tanga Port in Tanzania, has faced significant hurdles, including resistance from international environmental activists. This opposition has led major European and American banks to avoid financing the project, pushing TotalEnergies to seek loans from Beijing.

Despite these challenges, TotalEnergies is determined to secure the necessary financing, driven by current crude prices, rising global oil demand, and the natural decline of oil fields.

During a shareholder meeting, TotalEnergies Chairman and CEO Patrick Pouyanné highlighted the International Energy Agency’s forecast of a 106 million barrels per day demand by 2028, compared to 102 million barrels in 2023.

“The growth in oil demand is primarily driven by population growth in the global South, which requires more energy for a better quality of life,” Pouyanné said. He noted that while energy efficiency improvements are ongoing, the overall oil demand continues to rise, necessitating continued investment in oil production.

As of April, significant progress has been made on the EACOP project in both Uganda and Tanzania. This includes the development of the oil terminal and loading jetty at Tanga, above-ground installations like pumping stations, and the commencement of pipeline installation in June.

The coating plant in Sojo village, Nzenga District, Tabora region in Tanzania, completed and commissioned in March, is set to insulate the pipeline. This is a critical step before the pipeline’s installation along the route in Uganda and Tanzania.

As EACOP strives to overcome its financial hurdles, the project’s stakeholders remain committed to its timely completion, ensuring that East Africa can soon benefit from its vast oil reserves.