STANDARD Bank’s participation in the funding of the $5 billion (R77.4bn) East Africa Crude Oil Pipeline (Eacop) project would depend on environmental and social assessments and on the project meeting the Equator Principles requirements, the bank said yesterday.
Its participation was also subject to a “full assessment of the Eacop sponsors’ climate change strategies and targets”, the bank said in response to Business Report questions yesterday.
Four out of five of South Africa’s biggest lenders have said they will not participate in the project, bringing to 15 in total the number of financial institutions that will not support the project. Last week, after years of delay, France’s Total and China’s Cnooc signed the Final Investment Decision to proceed with the project, but all of the required financing has yet to be secured. Tanzania and Uganda also last week signed a deal with French and Chinese oil firms on the pipeline that will link Tanzania’s port Tanga to oil fields in Uganda.
However, environmental and civic groups, according to the online Pipeline Technology Journal, have protested the decision to proceed with the project because of the potential impact on affected communities around Lake Albert, where drilling will take place.
Equator Principles Project Finance deals are subject to a suite of due diligence assessments to inform decision making processes, covering legal, technical, security, market, reserves and environmental and social considerations and concerns.
Financial advisers, including Standard Bank, and potential lenders had retained the services of an independent adviser that would issue a full due diligence report in the coming months, at which time potential lenders will make a decision on the way forward, the bank said. Standard Bank will publish its climate change targets at the end of the first quarter of 2022.
Just Share, a shareholder activism non-profit organisation that aims to promote responsible investing, said the Eacop project would have severe impacts on people, climate and wildlife, and had already allegedly infringed on the rights of the communities who lie in the pipeline’s 1 443km path.
FirstRand, Absa and Nedbank have all previously participated in finance for new fossil fuel projects led by Total in Africa, meaning their refusal to join the Eacop project is likely to add to Total’s difficulties in finding finance for the project.
The Eacop, if completed, was expected to pump enough oil to add up to 34.3 million tons of carbon dioxide – around seven times the current emissions of Uganda and Tanzania – into the Earth’s atmosphere each year, at a time of acute climate crisis, Just Share said.
In addition, the project had been associated with a range of severe risks to communities, wildlife, forests and water resources.
Ryan Brightwell, Human Rights Campaign lead at BankTrack, comments: “Despite the show of progress with last week’s Final Investment Decision, Total and Cnooc stayed quiet on the crucial question of where the money will come from.
“And it’s no wonder, given the huge risks posed by the project to communities, nature, water resources like Lake Victoria, the climate, and ultimately to investors. The reality is that this project is struggling to find financiers unscrupulous and reckless enough to back it.”
BUSINESS REPORT ONLINE