A group of environmental organisations and NGOs are putting pressure on Japanese lender SMBC to end its involvement in a controversial US$5bn East African crude oil pipeline, ahead of a shareholder meeting this week.
In a letter sent to SMBC’s board this month, the campaign groups warn the bank’s role in the East African Crude Oil Pipeline (EACOP) is inconsistent with its own environmental and social pledges, leaving it open to accusations of “greenwashing” and possible legal action.
SMBC is reportedly advising French major Total, the operator of the 1,450km heated pipeline, which upon completion will transport oil extracted and refined in Uganda to a port on the Tanzanian coast, where it will be exported.
The Japanese bank is jointly arranging up to US$3bn in debt financing covering 60% of the project’s costs, having also supplied Total with several fossil fuel-related loans totaling US$2.2bn loans between 2017 and 2021, the memo says.
A growing list of lenders have ruled out involvement in EACOP amid warnings over its expected greenhouse gas emissions, displacement of local communities and potential damage to natural habitats – with the buried pipeline set to cut through multiple natural reserves, including Uganda’s Murchison Falls National Park and the basin of Lake Victoria.
Signees of the letter include BankTrack, Rainforest Action Network, Oil Change International and SMBC Group shareholder, the Kiko Network, who argue the pipeline will have a “significant contribution” to climate change by unlocking a new source of fossil fuels – one that is capable of emitting the equivalent of nearly nine coal-fired power plants when burned.
The project is expected to produce 230,000 barrels of oil per day at its peak, generating indirect emissions of more than 34 million tons of carbon dioxide equivalent.
“As board members of SMBC, you are responsible for overseeing risk management processes and disclosures by your institution, and for ensuring that SMBC acts in compliance with applicable laws and corporate policies.
“The reported role played by SMBC in the EACOP project exposes your bank to significant reputational and financial risks,” they say.
“Moreover, a failure to assess and manage the foreseeable risks posed by EACOP and its actual or foreseeable adverse impacts… could give rise to potential legal liability for SMBC, including for harms associated with the project, as well as potential liability for board members for breach of fiduciary duties.”
The letter says SMBC leaves itself open to accusations of “greenwashing” given the group’s policies on climate, environment, and human rights.
In one example, it flags the group’s commitment to not finance projects with a significant impact on wetlands, yet the EACOP plans to develop oil extraction wells and the pipeline in wetland sites designated as important under the Ramsar convention.
Total has found its options for financing EACOP limited amid a trend of financial institutions reducing their exposure to fossil fuels, a movement that clashes with plans in African countries such as Nigeria and Uganda to capitalise on as yet untapped oil and gas reserves.
The EACOP will allow Uganda to export oil for the first time and help the country earn vital foreign exchange revenues.
The project will extract oil upstream from the Lake Albert Development, including the Tilenga and Kingfisher projects in Uganda.
The oil will then be refined in Uganda to supply the local market and also exported globally via EACOP and Tanzania. The first export shipment is slated for early 2025.
The #StopEACOP campaign group estimates at least 20 commercial lenders have now distanced themselves from the crude pipeline, with Citi, Deutsche Bank and JP Morgan all reportedly ruling out loans for the project this year.
As many as four export credit agencies including those in Italy, Germany, France and the UK have indicated they will not back the pipeline.
Several insurers have also rowed back on EACOP, although a May report from the Financial Times and the Bureau of Investigative Journalism revealed that Marsh McLennan is reportedly arranging insurance for the African pipeline.
According to the letter, SMBC should “promptly examine and disclose” the risks associated with any support provided to date, withdraw from EACOP outright, and ensure the bank does not contribute to human rights issues now or in the future.
SMBC could not be reached for comment by GTR.
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