The $5bn EACOP pipeline clinches funding despite climate risks

East African Crude Oil Pipeline (EACOP) Ltd, the company developing a $5 billion crude oil pipeline in Uganda and Tanzania, closed the first round of external financing from a group of institutions, including commercial banks and the African Export-Import Bank (Afreximbank).

This was announced in a statement disclosed by EACOP Ltd. The statement mentioned that Standard Bank, Stanbic Bank Uganda, KCB Bank Uganda, and Saudi Arabia’s Islamic Corporation for the Development of the Private Sector, are among the financiers backing the project.

According to EACOP, “The successful closing of this first tranche of external financing represents a significant milestone for EACOP and its shareholders TotalEnergies (62%), Uganda National Oil Company (15%), Tanzania Petroleum Development Corporation (15%) and China’s CNOOC (8%). It also demonstrates the support of financial institutions on this transformative regional infrastructure.”

Last October, Uganda’s Energy Minister Ruth Nankabirwa told Reuters that EACOP’s development partners were injecting additional funds to keep the $5 billion project moving as debt financing remained challenging.

Nankabirwa travelled to Beijing to engage potential Chinese financiers, who were seen as critical to EACOP’s success after several Western banks, including BNP Paribas, Société Générale, and Barclays, withdrew under pressure from climate activists.

EACOP is a crude oil export infrastructure that will transport Ugandan crude oil to Tanzania for export to the international market. Upon completion, it will transport 246,000 barrels of crude oil per day. The project forms part of a broader $15 billion energy investment led by TotalEnergies, CNOOC, and other partners to develop the Kingfisher and Tilenga oil discoveries near Lake Albert.

A source familiar with the financing deal told Reuters that funders have pledged to cover the full $5 billion project cost, with Chinese investors also committing their support.

“The oil companies involved will contribute both equity and debt, and Chinese financiers are now on board,” the source confirmed.

Financial risk

Bhekumuzi Bhebhe, Campaigns Lead of Don’t Gas Africa, an NGO, told Gas Outlook that the pressure faced by current EACOP financiers is real and reflective of a global reckoning with the true costs of fossil fuel projects, spanning social, environmental, and financial impact. He said the earlier withdrawal of major Western banks due to climate concerns is not an isolated incident, but part of a broader trend of financial institutions aligning their portfolios with global climate commitments and responsible investment practices.

“As reputational costs rise and global ESG standards tighten, the financial risks of backing EACOP grow. Institutions like Nordea have already distanced themselves, proving that sustained public and investor pressure can shift decisions. Many of these banks rely on international partnerships and funding, making them sensitive to mounting scrutiny and the risk of being tied to a project increasingly seen as a stranded asset,” he said.

The withdrawal of Western banks from EACOP under climate pressure “clearly demonstrates the power of sustained advocacy and public accountability. That same pressure must now be adapted and intensified toward the current financiers particularly African and Chinese institutions who, despite earlier backlash, have chosen to proceed,” he told Gas Outlook.

“Many African and Chinese institutions depend on multilateral cooperation, donor funding, or global markets. Demonstrating how EACOP jeopardises these relationships can be a strategic deterrent. Just as Nordea Bank has taken steps against TotalEnergies over EACOP, similar pressure can be applied to shareholders of current financiers, especially those with global exposure,” he added.

Kudakwashe Manjonjo, Just Transition Advisor at PowerShift Africa, also firmly supports the de-financing of fossil fuel projects such as EACOP and hopes that Chinese and African institutions do the same. He told Gas Outlook that large gas projects such as EACOP are designed to be extractive without actually supporting the energy needs of the people of East Africa that it purports to help.

“The financing that is available should be directed to renewable projects that are not only more sustainable but are better suited to serve low-income families and communities,” he noted.

Global sustainability standards

Climate activists have argued that EACOP poses environmental risks, particularly regarding oil spills and the impact on local communities.

Bhekumuzi emphasised that no version of EACOP aligns with global sustainability standards because the project is inherently unsustainable. He said that it is a 1,443 km fossil fuel pipeline being built in the middle of a climate crisis.

“Furthermore, oil spills, community displacement, water contamination, and biodiversity loss are all very real and well-documented risks. But beyond that, the core premise of EACOP — which is expanding fossil fuel infrastructure in an era where we should be rapidly phasing it out — is already an environmental and moral failure. It doesn’t matter how many glossy sustainability reports they publish or how many trees they promise to plant in “compensation,” he said, adding: “There’s no greenwashing a pipeline.”

Kudakwashe further added that Africans need to reach a point of understanding that there are no environmental sustainability standards in fossil fuel projects that will not ultimately negatively affect communities and the environment where the projects are located. He said the Niger Delta has consistently shown that communities where there is oil are turned into sacrifice zones.

“Supposedly high-quality oil rigs also spill as shown in BP’s 2010 oil spill. The question we should be considering is what renewable energy-based projects (solar, geothermal, wind) can be set up following high environmental sustainability standards from a natural resource extraction point of view. Natural resources in this case include energy transition minerals such as bauxite, lithium and copper needed to build renewable energy systems,” he added.

Stranded asset risk

While EACOP is positioned as a transformative infrastructure project for East Africa, experts expressed fear that there can’t be a balance between short-term economic benefits and the long-term global shift toward renewable energy.

The Natural Resource Governance Institute warns that if national oil companies continue on their current path, they are poised to invest over $400 billion in high-cost oil and gas projects — investments that will only prove viable if global temperatures are allowed to rise well beyond the 2°C limit. In other words, these projects will only succeed if the world fails to meet its climate goals.

Kudakwashe believes that there is no balancing act that will not make EACOP a stranded asset, which the common person will have to pay for through taxes since it is a government-backed project. He said the shift to renewable energy is not a long-term shift but a current reality everywhere in the world except Africa, unfortunately.

“The risk of such projects like EACOP is that rules and regulations globally are demanding de-carbonised energy systems and EACOP cannot do that. Continued investment in that project is like investing in landlines in the late 1990s when everyone knew cellphones were becoming mainstream.

“Nokia’s lack of innovation in the cellphone market is a constant example of an institution failing to move on with the times. Oil-rich countries with projects 100x the size of EACOP are transitioning away from oil, yet Uganda want to enter that market! It is shooting ourselves in the economic foot,“ he said.

Bhekumuzi that the IPCC report underscores the growing risk of stranded fossil fuel assets—investments that, due to their long operational lifespans, could lock humanity into carbon-intensive pathways for decades to come. He said this is not just an environmental concern but an economic time bomb.

“Even financial institutions are raising red flags. Credit rating agencies like Fitch have cautioned that stranded assets could significantly damage the sovereign credit ratings of fossil fuel-exporting countries, making it harder for them to service existing debts. For Africa in particular, the United Nations University has identified stranded assets as a “very real threat” to the continent’s development trajectory.

“In short, continued investment in fossil fuel infrastructure like EACOP is not only environmentally reckless — it is economically short-sighted, exposing countries to long-term financial instability in an increasingly decarbonised world,” he concluded.

(Writing by Samuel Ajala; editing by Sophie Davies)