$200b Oil Project: China, Western Firms Unite on East African Crude Oil Pipeline
By Ranti Fausat
Despite the global plunge in oil prices, a major pipeline that would carry oil 900 miles across East Africa is moving ahead amidst warning that the $20 billion project will displace thousands of small farmers and put key wildlife habitat and coastal waters at risk.
According to Fred Pearce, a UK based freelance author, “the project is ready for construction, to bring to the world oil from new oil fields in the heart of Africa through the East African Crude Oil Pipeline.
“The middle of a global pandemic, during which oil demand is in freefall and prices at rock bottom, might seem an odd moment to boost the world’s oil production. But the petrochemicals industry is always looking for new reserves to replace those being exhausted.
“And two oil fields discovered on the shores of Lake Albert, which straddles the border between Uganda and the Democratic Republic of the Congo, are currently among the biggest and cheapest new reserves available. They contain an estimated six billion barrels, roughly half the size of Alaska’s Prudhoe Bay field.
According to the report published by Yale Environment 360, “construction work has begun at the Kingfisher and Tilenga oil fields, where the China National Offshore Oil Corporation and French giant Total intend to sink 500 wells.
“They have already spent an estimated $4 billion on infrastructure,The companies plan the world’s longest heated oil pipeline, stretching 900 miles from Lake Albert to Tanzania’s Indian Ocean port of Tanga.
The pipeline will carry 216,000 barrels of crude oil a day, and will require heating to 50 degrees Celsius (122 degrees Fahrenheit), because the oil is low in sulphur and will otherwise solidify in the pipe.
The companies claim they have resolved local environmental and social issues for the oil fields and pipeline, and that environmental and social impact assessments have given the $20 billion project a clean bill of health.
Total, which is heading up the pipeline project, claims it consulted 58,000 people, and chose a route to “minimize the number of residents relocated.”
The East African Crude Oil Pipeline will stretch 900 miles from Lake Albert in western Uganda to the Tanzanian port of Tanga on the Indian Ocean.
Uganda’s new energy minister, Mary Goretti Kitutu, is keen to push ahead and make the country sub-Saharan Africa’s fifth biggest oil producer.
In January, the Tanzanian environment minister Mussa Azzan Zungu gave the pipeline an environmental certificate.
The financing appears firm. Last month, the African Development Bank denied NGO claims that it planned to offer funds to the project, noting that it was committed to supporting renewable energy projects. But two key investors, Japan’s Sumitomo Mitsui Bank and the South Africa-based Standard Bank remain on board.
A dispute among the corporate partners ended in April when Total bought out Tullow Oil, the UK company that originally discovered the oil reserves 14 years ago.
This month, Tanzania’s energy minister Medard Kalemani announced that following the buyout, a final investment decision (FID) by the companies to go ahead with the project could be made in time for construction of the pipeline to begin in April 2021. It would be delivering crude in 2024.
The low global price of oil could be the last obstacle. But industry analysts say even continued low oil prices are unlikely to be a bar. The oil around Lake Albert is close to the surface and drilling conditions are easy, making production costs unusually low — just $20-25 per barrel for the Tilenga oil field.
Even when government pipeline tariffs are added, Norway-based consultants Rystad Energy rated Tilenga oil the cheapest, as well as the biggest, new oil project on the continent.
The project remains “very competitive,” one local newsletter, East African Business Week, reported in late April. “While Total is following a global trend of drastically cutting expenses in light of Covid-19 pandemic and the collapse of oil demand and prices, the project’s economics make it one of the most likely to get FID in the near future.”
But local NGOs and international experts in environmental and social impact assessments are worried about the impact of the project. They say that the environmental risks of the pipeline and production facilities are huge, and that consultations with communities amount to little more than what Oxfam-Uganda’s Gerald Byarugaba calls “box-ticking.”
The full project report can be accessed here: https://e360.yale.edu/features/a-major-oil-pipeline-project-strikes-deep-at-the-heart-of-africa