Why Banks Are Keeping Off Total’s East African Pipeline Funding

Three French banks have committed not to provide project financing for the Total-led East African Crude Oil Pipeline (EACOP).

BNP Paribas, Société Générale and Crédit Agricole will not participate, France’s Les Echos newspaper reported.

“The project is too hard to defend,” Les Echos quoted an unnamed source as saying.

A statement from Reclaim Finance noted that Barclays, Credit Suisse and ANZ had also said they would steer clear of the EACOP plan.

The environmental NGO called on Natixis to follow suit.

BankTrack researcher Ryan Brightwell called on Standard Bank, SMBC and ICBC “to take these concerns seriously and withdraw their support”.

Total committed to the Lake Albert development, which includes EACOP, on April 11. However, it has not concluded talks on securing the expected $2.5 billion of financing thought to be required to build the world’s longest heated pipeline.

Crédit Agricole has provided $7.3 billion of financing to Total between 2016 and 2020, while BNP Paribas provided nearly $6bn. The four French banks in total have provided more than $16bn to Total, it said.

Amundi, in which Crédit Agricole is the largest shareholder, is the second largest shareholder in Total after BlackRock.

Broader push

Reclaim Finance’s founder Lucie Pinson welcomed the move, saying it was a “major blow for this polluting and unjust pipeline. Natixis and other international banks should now follow their lead.”

Pinson went on to say the banks should not finance new oil and gas projects of Total, while shareholders should vote against the company’s climate strategy.

Total is holding its AGM on May 28. Shareholders will vote on Total’s plans for carbon neutrality by 2050, with a 15% reduction by 2030.

Reclaim Finance has criticised Total for failing to include its scope 3 emissions in its carbon neutrality plans, outside Europe.

The NGO has said the vote at Total’s AGM is about communication. “Total does not need to be encouraged to communicate on its climate strategy; Total needs to be pushed to adopt a climate strategy that is compatible with a viable climate trajectory,” it has said.

The pipeline’s critics say 2,000 square kilometers (770 square miles) of protected areas will be impacted and 12,000 families displaced from their land.

If completed, the $3.5 billion pipeline will transport heavy crude from more than 130 wells inside Uganda’s largest national park, which is home to threatened African elephants and lions, a formidable population of Nile crocodiles, and more than 400 bird species. Conservationists say it won’t just threaten wildlife but that it flies in the face of efforts to curb global warming by locking in investment in a dirty fuel.

A coalition of NGOs opposing the pipeline says the pipeline planning process has been opaque throughout, disregarding judicial and parliamentary procedures.

The pipeline’s route runs through the Lake Victoria basin, crossing waterways big and small, including the Kagera River. In Uganda, its path will impact almost 2,000 km2 (770 mi2) of protected areas sheltering endangered species including eastern chimpanzees and African savanna elephants.

In Tanzania, the pipeline runs through seven forest reserves and the Wembere Steppe, a recognized key biodiversity area. The Tanga port itself abuts two ecologically sensitive marine areas.

The prospect of oil spills tarnishing this wilderness and the absence of assurances about mitigation measures have fueled resistance. The greenlighting of the project in the absence of final environmental and social management plans, drawn up through proper public consultation, has alarmed many.

In March, in response to growing pressure from green groups, the French oil giant announced that its drilling activities in Murchison Falls National Park will be restricted to 1% of the park’s area and that it would bankroll a 50% increase in the number of rangers to bolster conservation efforts.

This concession failed to placate critics.

“Major environmental and human rights risks remain. The top priority should be to deal with the concerns of communities suffering from the project, not start drilling at all cost,” Antoine Madelin, advocacy director of the International Federation for Human Rights, told the Associated Press.

More than 12,000 families will be displaced from their ancestral lands to make way for the pipeline. Questions remain about whether they will be adequately compensated. A 2020 report coproduced by Oxfam and other rights-based organizations found that people likely affected by the pipeline in Uganda and Tanzania did not have adequate information about timelines, compensative procedures, and the social and environmental risks involved. The mega project meant to secure the future of populations in the two countries has introduced created greater uncertainty for those whose lives will be most disrupted by it.

To halt the project, green groups are trying toblock funding by lobbying investors, banks and insurance companies. In March, an open letter signed by more than 250 civil society organizations called on 25 commercial banks not to finance the project. The campaign led two of Total’s key financiers, Barclays and Credit Suisse, to deny any intention of funding the EACOP.

Annual per capita income in Uganda is less than $800, and the government has pinned its hope on oil riches to pull the country out of poverty. “We believe that this should be a catalyst for economic growth,” Robert Kasande, a top official at Uganda’s ministry of energy, said during the signing ceremony.

Environmentalists point out that the economics of investing in fossil fuels don’t add up. “The whole world is waking up to the fact that we need to stop burning fossil fuels, and as a result, the price of oil will continue to plummet,” the open letter said. “Rather than betting its development on a dying industry, we need to recognize that East Africa’s economic strength comes from the region’s biodiversity, heritage, and natural landscapes.”

The agreements signed this month now need to be ratified by the parliaments in Uganda and Tanzania. Construction is expected to begin in July, and the first oil exports are anticipated in 2025.

Total has a majority stake in the East African Crude Oil Pipeline (EACOP) project, with the Uganda National Oil Company, CNOOC, and Tanzania Petroleum Development Corporation being minority stakeholders.

Shell is also holding a vote on its climate ambitions in May and has come under fire for its plans.