Total commits to extracting Uganda's oil despite environmental concerns

TotalEnergies, the French oil major has further reaffirmed its commitment to extract Uganda’s oil despite environmental concerns by climate activists.

The company has been under intense pressure to abandon the East African Crude Oil Pipeline (EACOP) project as well as the Tilenga development project in the Albertine Graben. TotalEnergie’s CEO and chairman Patrick Jean Pouyanné however said oil projects in Uganda, the Middle East, and Brazil will continue but in accordance with the firm’s climate action commitment. 

On investments in the Middle East, he noted that “I often say that the last drop of oil will be produced there. So positioning the company in these countries is a way to protect the portfolio and to be able to continue to maintain the cash and run of this portfolio.” 

 Pouyanné's address on Tuesday coincided with the launch of the company’s Sustainability & Climate 2023 Progress report. The report outlines TotalEnergies' progress in its transformation strategy and the update on its climate ambition.

TotalEnergies committed to investing $13-15 billion per year between 2022 and 2025. It plans to allocate 50 per cent of those investments to grow its activities and 50 per cent to maintain the base of its activities, 50 per cent of the growth investments will be dedicated to the development of new energies, mainly renewables and electricity, and the other 50 per cent to natural gas, essentially LNG.

A statement said TotalEnergies was the most profitable major in 2022 among the five super-majors. TotalEnergies' return on average capital employed (RoACE) was more than 28 per cent, allowing it to distribute 37.2 per cent of the $47 billion of the cash flow it generated to its shareholders.

“The resilience of oil by TotalEnergies which we position with low-breakeven and low cost of less than $20 per barrel. We have evaluated our portfolio against what could be the demand according to the value scenario we are in. So it is clearly safe,” he said.

The international price of oil normally affects the commercial viability of oil production. Some have wondered whether new projects like Tilenga will be commercially viable and profitable in Uganda and hence how much oil can be pumped out of the ground. 

The price per barrel of oil over the last 20 years has tended to vary with the lowest at $10 a barrel and as high as $140 dollars a barrel. Pouyanné said in Uganda and elsewhere, TotalEnergies will focus on investments in low-cost and low-carbon assets. The cash flow from assets in Uganda, Angola, Brazil, and the United Arab Emirates is geared toward investment in renewable energy projects. 

The report further outlines progress on Tilenga and EACOP projects whose final investment decision (FID) was taken on February 1, 2022. For Tilenga, the report says 94 per cent of compensation agreements had been signed and that 92 per cent had been paid out as of the end of 2022. 

With the EACOP, the report said 91 per cent of compensation agreements had been signed, 85 per cent paid out as of December 2022, and 775 of the households chose to be rehoused in newly constructed homes nearby the pipeline project. 205 out of the 775 houses had reportedly been delivered by the beginning of March 2023. 

The company said nearly 80,000 direct and indirect jobs will be created during the construction phase of EACOP and nearly $2 billion in contracts will be awarded to local businesses. 42,000 direct and indirect jobs are expected during the operational phase of the pipeline.