Numerous insurance companies have decided against providing coverage for the East African Crude Oil Pipeline (EACOP), exacerbating the project’s persistent challenges, which have led to a four-year construction delay.
A total of 28 insurers have publicly announced their refusal to insure the EACOP, citing pressure from climate activists who argue that the project carries substantial environmental and human rights risks. However, despite this trend, a few companies, including AIG, Tokio Marine, Chaucer, and Hiscox, remain willing to underwrite the project.
Recently, SiriusPoint, Riverstone International, Enstar Group, and specialty insurers Blenheim and SA Meacock have joined the ranks of insurers declining involvement in the transboundary project. Riverstone International explicitly stated that it neither directly nor indirectly underwrites the EACOP project and has no intention to do so. Similarly, SiriusPoint declared its non-participation in the EACOP tender, with Enstar, Blenheim, and SA Meacock issuing similarly unequivocal statements.
These decisions come after concerted efforts by environmental organizations such as Coal Action Network, Insure Our Future, and StopEACOP to hold insurance firms accountable for their association with energy projects deemed environmentally harmful and detrimental to local communities.
The increasing number of insurers withdrawing support leaves the project’s future uncertain, as local insurers are unable to cover more than 30 percent of the required insurance. According to Dickens Kamugisha, executive director of the Kampala-based Africa Institute for Energy Governance (Afiego), the Ugandan government may be compelled to relax its standards and offer attractive terms due to its significant debt burden.
The EACOP, a 1,443-kilometer pipeline stretching from Hoima in western Uganda to the Tanzanian port of Tanga, is predominantly owned (62 percent) by French oil giant TotalEnergies and state oil companies from China, Uganda, and Tanzania. The pipeline’s planned route traverses ecologically sensitive areas, raising concerns among environmentalists.
While the project faces environmental and economic challenges, including volatility in global oil prices and the shift towards renewable energy sources, proponents like Uganda National Oil Company’s Peter Mulisa emphasize the implementation of safety measures and the potential economic benefits.
Despite these assurances, Western banks have hesitated to finance the project, while Chinese lenders, though promising $3.5 billion, have yet to make a final decision. This uncertainty could lead to further delays.
Moreover, questions regarding the project’s economic viability persist, particularly in light of the global transition away from fossil fuels. Kamugisha asserts that international financial institutions are hesitant to invest in projects reliant on fossil fuels due to their diminishing economic prospects.
At the recent COP28 in Dubai, nations acknowledged the imperative to transition towards clean energy solutions. Environmentalists advocate for greater responsibility from the insurance and banking sectors in avoiding fossil fuel projects and supporting a sustainable future.
Despite differing perspectives on the project’s merits, stakeholders agree on the importance of clean energy investments that benefit local populations. Angela Ambaho, head of corporate affairs at the Uganda National Oil Company, remains optimistic about the project’s progress, noting the commencement of installations in Tanzania and Uganda.
With a target completion date set for December 2025, the EACOP continues to navigate challenges amidst ongoing debates over its environmental impact and economic viability.
