![\"map](\"https:\/\/dialogue.earth\/content\/uploads\/2020\/01\/20200114_Uganda-Tanzania_Proposed_Pipeline-01.png\")
<\/div>The pipeline was arranged as a joint project between the Uganda National Oil Company, Tanzania\u2019s Petroleum Development Corporation and the same three firms involved in the oil extraction joint consortium.<\/p>\n\n\n\n
In 2019, construction of the pipeline and resettlement of affected citizens had already started. But work stopped in September when Total pulled out after a deal fell through with CNOOC to buy 21.5% of Tullow\u2019s shares in the project.<\/p>\n\n\n\n
Local officials say the stoppage is temporary and the project will continue as planned. However, Total and CNOOC are sending employees home<\/a> so it seems unlikely it will happen on schedule, if at all.<\/p>\n\n\n\n The delay gives CNOOC, Chinese officials and banks the opportunity to rethink their involvement in the project.<\/p>\n\n\n\n During April\u2019s Belt and Road Forum in Beijing, Premier Xi doubled down on his commitment to \u201cgreen\u201d the Belt and Road Initiative (BRI). Xi\u2019s words are backed by multiple official documents calling for the BRI to support \u201cenergy conservation and emissions reductions\u2026 [and to] jointly respond to climate change<\/a>\u201d. They also call for the BRI to \u201cstrictly control the emissions of pollutants and greenhouse gases\u2026 and contribute to green and efficient development\u201d.<\/a><\/p>\n\n\n\n The pipeline alone would stop Uganda from reaching its Paris Agreement pledges.\u201d<\/p>\n\n\n\n Building the pipeline is not in line with a sustainable vision for the BRI. Currently, the official environmental and social impact assessment of Uganda\u2019s portion of the pipeline only looks at the \u201cdirect impacts<\/a>\u201d of its construction and heating. In other words, it doesn\u2019t account for the substantial emissions that would be generated from the sale of extracted oil by the cars, trucks and planes that would burn it. Noticing this major oversight, independent researchers set out to make estimates of their own on the global climate impact of the pipeline.<\/p>\n\n\n\n Considering the fuel density of the oil blend that would pass through the pipeline, they found Uganda\u2019s heavy oil would result in emissions of 3.14 kilograms of CO2 equivalent per kilogram of fuel. Multiplying this number by the planned 79 million<\/a> barrels of oil the pipeline would carry amounts to 10.9 million metric tons of direct emissions annually \u2013 twice Uganda\u2019s current total emissions. The pipeline alone would stop Uganda from reaching its Paris Agreement pledge to reduce emissions 22% by 2030.<\/a><\/p>\n\n\n\n Furthermore, the researchers concluded that the project\u2019s indirect emissions (from burning the oil) would be at least 34.3 million metric tons of CO2<\/sub>eq emissions per year \u2013 roughly equivalent to Denmark\u2019s annual emissions.<\/p>\n\n\n\n This comes at a time when the oil, gas and coal reserves in operating fields and mines across the world already far exceed what can be burned if we are to avoid reaching the 2C warming limit climate scientists consider \u201ccatastrophic<\/a>\u201d for the planet.<\/p>\n\n\n\n Nearly a third of the pipeline would be constructed in the Lake Victoria basin, which 30 million people<\/a> depend on for their livelihoods. A leak could have catastrophic effects on local water resources, the environment and the communities living in the basin. The likelihood of an accident is magnified by the pipeline\u2019s route, which transits a medium-risk seismic<\/a> zone<\/a> (the second-most serious level), according to the Global Facility for Disaster Reduction and Recovery.<\/p>\n\n\n\n Despite these risks, the pipeline\u2019s environmental and social impact assessments are seriously lacking. Local civil society organisations<\/a> assert the company that conducted the assessment was not legally registered to do so in Uganda. The Netherlands Commission for Environmental Assessment, which recently reviewed<\/a> the assessment\u2019s treatment of the Ugandan portion of the pipeline, found the negative impacts on water and wetland crossings were inadequately addressed.<\/p>\n\n\n\n It also criticised the assessment for not providing adequate measures to mitigate impacts on 11 important animals and plant species affected by the pipeline\u2019s route, including the chimpanzee, hippopotamus and crested crane, Uganda\u2019s national bird. The Netherlands Commission concluded<\/a> the impact assessment is \u201cnot fit for purpose\u201d.<\/p>\n\n\n\n Moreover, no impact assessment has been published for the Tanzanian portion of the pipeline, which would account for 80% of its length. The lack of transparency goes against Tanzania\u2019s Environmental Management Act of 2004<\/a>. And overseas investment guidelines<\/a> produced by China\u2019s State Council in 2017 restrict Chinese firms from taking part in investments that \u201cdo not meet the environmental protection\u2026 and safety standards of the target country\u201d.<\/p>\n\n\n\n China\u2019s banking regulator has strongly supported making overseas investment and finance sustainable, building on years of promoting green finance<\/a> both at home and overseas. In the case of the East Africa Crude Oil Pipeline, most Chinese banks have prudently avoided financing the project so far.<\/p>\n\n\n\n The one exception is the Industrial and Commercial Bank of China (ICBC), the largest shareholder of South Africa\u2019s Standard Bank, which along with Japan\u2019s Sumitomo Mitsui bank, is a lead financial arranger of the pipeline project. ICBC\u2019s 20% stake in Standard Bank gives it strategic influence<\/a> with the South African lender. The ownership stake also provides ICBC with a platform<\/a> for large deals in Africa involving Chinese players. The pipeline, which is being developed by one of China\u2019s largest state-run oil companies, fits that bill.<\/p>\n\n\n\n In response to Total\u2019s exit, local officials<\/a> in Uganda say the pipeline is not dead, and are still planning to start construction before 2021<\/a>. If that is the case, CNOOC and its future partners will most likely need to finance approximately two-thirds of<\/a> the project (US$2.5 billion) through external debt. As recently as August, Standard Bank said the project has \u201clots of interest<\/a>\u201d and that finding additional financing would \u201cnot be a problem\u201d.<\/p>\n\n\n\n Chinese state-owned commercial banks have not financed the pipeline but the Agricultural Bank of China, Bank of China, and China Construction Bank have all been recent financiers of CNOOC and fossil fuel pipelines globally<\/a>. The same can be said for China\u2019s largest BRI project funder, China Development Bank<\/a>, and China\u2019s Export-Import Bank, which also finance fossil fuel projects<\/a>.<\/p>\n\n\n\n These institutions would do well to adhere to China Banking and Insurance Regulatory Commission\u2019s Green Credit Guidelines<\/a>, which urge lending institutions to conduct proper due diligence and \u201cregard how well clients have managed environmental and social risks as [an] important basis for credit funds appropriation.\u201d The gravity of the environmental and social risks involved with the planned pipeline, as well as the considerable local civil society opposition to the project, should deter Chinese financiers altogether.<\/p>\n\n\n\n CNOOC is one of the largest oil companies in the world but unlike other major Chinese<\/a> and international fossil fuel companies<\/a> it has been slower to diversify into renewable energy. While its first foray into the renewable energy field was unsuccessful<\/a>, in 2019 the company revived its energy diversification plans with investments in offshore wind<\/a> in China and a $300 million investment into a Spanish solar energy company<\/a>.<\/p>\n\n\n\n CNOOC can use this unexpected opportunity to rethink its investment in the economically and environmentally risky East Africa Crude Oil Pipeline and deploy its international expertise to further expand its renewable energy business. Uganda and Tanzania have both recently opened up their energy systems to solar projects, and decreasing costs for renewables make investing in them lower risk, more sustainable and quicker to see a return on.<\/p>\n","protected":false},"excerpt":{"rendered":" Chinese lenders should pull out of the risky Uganda\u2013Tanzania oil project and invest in renewables instead, argues Erik Myxter-lino<\/p>\n","protected":false},"author":3596,"featured_media":60701,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[757],"tags":[547,50029971,573],"hashtags":[],"country":[20000110,50040722,50040743],"class_list":["post-36783","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-energy","tag-fossil-fuels","tag-oil","tag-oil-spill","country-china","country-tanzania","country-uganda"],"acf":[],"yoast_head":"\nA different route<\/h2>\n\n\n\n
Lake Victoria threatened<\/h2>\n\n\n\n
![\"Ankole](\"https:\/\/dialogue.earth\/content\/uploads\/2020\/01\/BT7XAT.jpg\")
<\/div>Lenders should avoid the high-risk pipeline<\/h2>\n\n\n\n
A new direction for CNOOC in East Africa?<\/h2>\n\n\n\n