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From western Uganda, the East African crude oil pipeline will run 1,443 km through fields, forests and rivers until it reaches the Tanzanian coast. If, that is, someone pays for it. Already, 27 banks have disowned themselves as lenders. Shareholders led by French oil giant TotalEnergies are now courting Chinese companies as they try to raise $2.4 billion in debt. In response, environmental and human rights activists in six African and European countries protested outside Chinese banks, embassies, and insurance companies on 20 November.

The fight is a sign of things to come as Western lenders rethink fossil fuels. Several banks, including Societe Generale, say they will no longer directly finance new oil and gas projects. G7 governments have also pledged to end support for foreign extraction, with some caveats and loopholes. “We need to recognize you [can’t] Just go to Mayfair or the City and make a deal,” says Rahul Dheer, chief executive of Tullow Oil, which sources most of its barrels from Ghana. “You have to go to Cairo, you are going to Lagos, you are going to Beijing.”

In Africa, drilling continues, at least for now. Politicians argue that the revenues can finance development, even though African people are on the front lines of climate change (and oil and gas often lead to corruption, not prosperity). Wood Mackenzie, a consultancy, expects to spend about $300 billion of capital on African oil and gas extraction this decade. Beyond lining their own pockets, companies have three options: go local, woo traders or look east.

African creditors, like the continent’s politicians, remain bullish on fossil fuels. In South Africa, Standard Bank is expanding its oil-and-gas portfolio and acting as financial advisor on the East African Pipeline. The African Export-Import Bank, based in Cairo, is teaming up with oil-producing countries to launch an “African Energy Bank”, which will bridge the gap left by traditional financiers. Ayodeji Dawodu of Banktrust, an investment bank, says such African multilateral ventures have helped keep the Nigerian oil sector afloat by assuming financial risks that would deter local lenders.

Funding for existing projects also comes from trading firms such as Glencore and Vitol, which will arrange multi-year loans in exchange for future barrels. “We have no ambition to replace banks, we just want more barrels for business,” says one financier. These types of prepayments are popular among medium-sized producers and national oil companies, as they can be arranged quickly. Yet they can also create difficulties. Opaque deals with oil traders were at the center of recent debt problems in Republic of the Congo and Chad, as state companies struggled to meet their commitments.

The third option is to look east. Saudi Aramco is investing in Nigerian oil refineries; The Islamic Development Bank has pledged $100 million for the East African Pipeline. The most important is China, which has a long history of resource-backed lending, mostly through its state-owned financial firms. Despite a slowing economy, which has delayed foreign lending, Chinese companies are making more direct investments in African oil and gas than ever before.

Nor is Western capital completely retreating. Its oil giants will still provide funding for major projects such as the Namibian oil fields, possibly the largest ever discovered south of the Sahara. There will still be money for gas, which has a cleaner reputation than oil. And although banks are wary of backing specific projects, they seem less concerned about general purpose finance, such as underwriting corporate loans or bond issuances. Western lenders accounted for two-thirds of corporate financing for fossil fuels in Africa between 2016 and 2021, according to two Dutch NGOs Banktrack and Milieudefensie and an American Oil Change International.

Still, the cost of capital is rising. Combined with weak demand, this could put assets in places like Angola and Nigeria at risk. Extraction in Africa is expensive and carbon-intensive. McKinsey, a consultancy, believes that 60% of the continent’s production could become uncompetitive by 2040 if rich countries stick to green commitments. Oil provides about 60% of the fiscal revenues of countries that export it; Gas provides an increasing share of the continent’s electricity. African governments complain that they are being led to an energy transition according to someone else’s timetable.

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