Standard Group, China’s IBC to advise on oil pipeline financing

Uganda, Tanzania, and French oil giant Total E&P, have tapped a consortium of South African based Standard Bank, Imperial Bank of China (IBC) and Sumitomo Mitsui Banking Corporation Europe Ltd, as the financial transactional advisors for the proposed East African Crude Oil Pipeline (EACOP).

Standard Bank, one of Africa’s largest financial services groups and with operations in 20 countries on the continent, will advise the two governments on the sourcing of the $3.55b (Shs12.6 trillion) required for financing the project.

IBC will advise China National Offshore Oil Corporation (CNOOC) while SMBC will work with French oil giant, Total E&P, the lead joint venture partner on the crude oil export pipeline.

The pipeline, running 1,445km from Kabaale in Hoima district to Tanga Port on the Indian Ocean, will be financed through debt.

The three financial firms will guide the respective parties in the ongoing discussions of a financing blueprint for the project.

Preliminary information indicates that the two countries will turn to international lenders to raise 70% of the $3.5 bn capital expenditure.

The remaining 30% capital will be raised through equity by the joint venture partners and the national oil companies of the two countries.

The partners are currently in talks to form a special purpose vehicle that will construct, own, and operate the pipeline, as well negotiate the shareholder’s agreement, project financing agreements, and transportation agreement between shippers (of oil from Tanga to international markets).

The vehicle will pay back the lenders from the project’s returns.

The project’s front-end engineering design study is expected to be completed by the end of August and will offer a clear picture of engineering, procurement and construction costs.

Standard Bank Group was also the government’s financial advisor on the $900m Bujagali dam and, most recently, on the Karuma hydropower project, whose construction is ongoing.

Meanwhile, President Museveni and his Tanzanian counterpart John Magufuli, today Saturday laid a foundation stone for the pipeline at Chongoleani Marine Terminal at Tanga.