Uganda National Oil Company (UNOC) is in advanced talks with Chinese export credit agency SINOSURE to provide credit for its crude oil pipeline after pressure from environmentalists forced some Western banks to recoil from the project, a top official said on Monday; Reuters has reported.

The projects for the development of the oil and gas resources of the Lake Albert region and the cross-border pipeline are situated in a sensitive social and environmental context that requires special measures for the environment and the rights of the local communities. The EACOP development project is spanned about 1,445-kilometre and Uganda as land lock country is expected to export its crude from oilfields in the country’s west via a distant pipelines to a port on Tanzania’s Indian Ocean coast.

The Lake Albert region in Uganda has major oil and gas resources, estimated at over one billion barrels. Uganda wanted to develop them under the projects Tilenga, operated by TotalEnergies, and Kingfisher by CNOOC.* Production will be delivered to the Tanzanian port of Tanga by a cross-border pipeline, built and operated by the EACOP company (East African Crude Oil Pipeline). 

The project will cost $5 billion, including the cost of credit and 40% of the money will be raised through debt while the rest will come from equity, Irene Bateebe, permanent secretary for Uganda’s Ministry of Energy and Mineral Development told Reuters.

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“Together with others we are raising some financing through SINOSURE which is going to be one of our biggest contributors to the debt,” she said.

“We are working towards financial close. So we are at the tail-end of the discussions for the financial close and we are confident by the end of October of this year we should close the debt component.”

Bateebe did not give an exact amount of how much money SINOSURE would be providing in credit.

She said they had faced frustration with Western banks after environmental groups pressured the lenders to desist from funding the project on grounds the pipeline would ruin the environment and contribute to rising carbon emissions.

“You then look at who is your other friend … we did have other friends who were willing to come onboard and that’s where we looked, we became eastern-looking,” she said.

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EACOP: this project consists of the construction of a buried 1,443 km oil pipeline between the town of Kabaale in Uganda and the port of Tanga in Tanzania, and a storage terminal and loading jetty in Tanga. The oil pipeline includes six pumping stations, powered by solar plants in Tanzania, and a heat tracing system. The physical characteristics of the oil from Tilenga mean that it needs to be kept at a temperature of 50°C for transportation. The route of the pipeline was designed to avoid areas of environmental interest as much as possible, and generally crosses farming areas.