US Broker Breaks Ranks to Cover East African Pipeline Risk
Africa Investment

US Broker Breaks Ranks to Cover East African Pipeline Risk

The world’s largest insurance broker, Marsh McLennan, has broken ranks and agreed to arrange cover for the proposed East African Crude Oil Pipeline (EACOP) which will ferry the commodity from Uganda’s western oilfields to the Tanzanian port of Tanga.

However, in light of the opposition to development of new carbon projects amidst mounting concerns about global warming and climate change, the company will not confirm its involvement.

This comes a month after the German firm, Allianz, another major global player, declined to provide insurance for the $3.5 billion project in the face of a sustained environmentalist lobby that views the pipeline as a disaster in the making.

Several banks and other insurance companies have publicly expressed no interest, but notably France’s President Emmanuel Macron, has touted the importance of the project.

President Yoweri Museveni and his Tanzanian counterpart, President Samia Suluhu Hassan, have already signed off on the EACOP and earlier this year France’s TotalEnegies and China National Offshore Oil Corporation (CNOOC) Uganda Limited announced the final investment decision (FID) to implement the project.

TotalEnergies and China National Offshore Oil Corporation (CNOOC) Uganda Limited are taking lead in developing the Tilenga and Kingfisher oilfields respectively.

The Tilenga and Kingfisher projects are expected to start producing in 2025 and to reach a cumulative plateau production of 230,000 barrels per day.

Patrick Pouyanné, the Chairman and CEO of TotalEnergies said during the announcement of the FID, “The development of Lake Albert resources is a major project for Uganda and Tanzania, and our ambition is to make it an exemplary project in terms of shared prosperity and sustainable development. We are fully aware of the important social and environmental challenges it represents.

We will pay particular attention to use local skills, to develop them through training programs, to boost the local industrial sector in order to maximize the positive local return of this project.”

Marsh McLennan is headquartered in New York City with businesses in insurance brokerage, risk management, reinsurance services, among other services.

According to the activists, at 1,400 kilometre pipeline will slice through the habitats of elephants, giraffes, and chimpanzees and threaten to pollute Lake Victoria, which supports the livelihoods of more than 40 million people.

They also point to a review of an environmental assessment report warning that oil spills ‘will occur’ because of the project.

In response, officials from the special purpose vehicle set to implement EACOP said in a statement,

‘The pipeline does not slice through the habitats of elephants, giraffes, and chimpanzees, and neither does it go through Lake Victoria’.

The statement adds: ‘By some estimates there are 3.5 million km of pipelines in the world. Oil spills are not inevitable.

In the particular case of EACOP it is designed, pressure tested and monitored along its entire length using a fiber optic cable.

Even in the unlikely event of a leak, the design is such that the inventory lost is minimized and emergency response plans will be in place. The pipe does not pose a threat to the livelihoods of more than 40 million people’.

Furthermore, ‘The pipeline route was selected over several years after comprehensive feasibility studies directed at avoiding environmentally and socially sensitive areas such as protected areas and areas of high population density’.

A spokesperson for Marsh McLennan said recently the company is committed to helping businesses develop low-carbon business models and manage risks associated with the transition to renewable energy.

The company said in a statement, “We recognize that a secure energy supply is crucial for the global economy and society.

We believe all communities are best served by working with operators of clean energy assets to accelerate progress to a lower carbon world and with traditional energy clients to enable them to manage the risks associated with current projects and make the transition as quickly and responsibly as possible’.

It was also clarified that Marsh McLennan had a longstanding policy of not confirming the identity of its clients.

Several employees have voiced their displeasure over the decision, including writing a protest letter to management appended by 100 signatures.

In their letter, the employees asked: ‘Will clients trust us to provide climate risk management if they know we also support projects which worsen these very risks?’

Museveni disagrees, “We are going to use the resources from oil to build durable sectors and by the time the oil gets finished it will get us at a certain level (of economic development),” he said.

Both the Tanzanian and Ugandan governments have highlighted the future earnings opportunities for people along the route of the pipeline and the regional services industry as a whole.

But people like Diana Nabiruma of the Africa Institute for Energy Governance, an NGO focused on promoting clean energy are not convinced.

“That is just rhetoric to guilt the western world into accepting the project. There are greener and more sustainable options.

She points to Uganda’s plan for sustainable growth, which could deliver up to 4 million jobs and 10% growth in GDP by 2040 as well as cutting emissions,” she said.

Museveni has consistently told critics, Africans’ options to achieve economic growth, without adequate energy resources are severely limited, especially since it these same carbon resources, namely oil and coal, which have been the basis of industrialization in much of the advanced countries.

With a rapidly growing population, Africa and particularly Uganda, does not have the luxury to pick and choose.