June 2022, Vol. 249, No. 6


Hurdles of Acquiring ROW in Africa Pipeline Projects

By Shem Oirere, Contributing Editor, Africa

In the recent past, Africa has announced major natural gas discoveries, particularly in Egypt, Mozambique, Tanzania, Senegal, Mauritania and South Africa, with analysts estimating the discoveries to be equivalent of 40% of the global discoveries, especially between 2011 and 2018.

An oil pipeline being installed in sub-Saharan Africa

Such discovery is good news for the African governments’ drive to industrialize the continent since the discovered natural gas has potential to support generation of the much-needed electricity to buttress industrial growth.

However, it turns out that harnessing the full potential of the discovered natural gas, alongside crude oil, remains an unfulfilled dream because of the challenges in developing appropriate infrastructure to evacuate the resource for processing and consumption.

One of the hurdles in the development of oil and gas resources has been the acquisition of rights-of-way (ROWs) for laying the pipeline network to transport the gas and oil in Africa, a region with estimated proven reserves of 527 Tcf (14.9 Tcm) and 125.7 billion barrels of crude oil, respectively.

Construction of oil and gas pipelines in Africa continues to be difficult because of the timely acquisition of easements or ROWs as a result of the complex nature of land ownership in the continent and the never-ending and convoluted government bureaucracy in compensation for property on project routes.

Although, in some cases, governments and pipeline developers have used compulsory acquisition of land for laying the pipelines or expropriating the property on notice. Communities within the ROW continue to feel excluded from the project and could blamed for subsequent encroachments of the pipeline routes and fuel theft during transportation.

For example, South Africa’s Transnet Pipelines Ltd, a subsidiary of one of Africa’s largest rail, port and pipeline companies, Transnet SOC Ltd, said encroachment on pipeline ROW continues to pose major challenges to its operations. To tackle the challenge, the company, like many in Africa, has been forced to increase the cost of operations, especially in the form of deployment of technology solutions to curb vandalism, theft or even encroachments.

Although the company says it always considers the problem of invasion of ROWs whenever it installs a new pipeline, “encroachment into pipeline servitudes seems to be an increasing problem in South Africa.”

The mode of land ownership in Africa is a factor fueling the challenge of encroachment of pipeline servitudes in the region, with several sections of land in the identified pipeline project route being the subject of litigation to determine true owners or, in some cases, the properties being owned by absentee individuals who cannot be traced in time to sign easements to fast-track pipeline project processes.

In the case of Transnet Pipeline Ltd, the new multiproduct pipeline, so far the single biggest project in the company’s capital expenditure investment portfolio, has had difficulty in obtaining agreements for the ROW, according to company shareholders’ briefs.

Obtaining permits or agreements for the ROW was the main impediment. Previously, the company said that although it had concluded servitude agreements with owners of properties along the route for the construction, installation and operation of the pipeline, “Transnet is not certain that it has complete information in respect of certain properties that landowners’ precise whereabouts could not be ascertained.”

“Despite reasonable endeavors to ascertain the identity and contact details of other potentially interested and affected parties, Transnet is not certain that it has complete information,” the company said of its effort to acquire ROW for the 345-mile (555-km)-long trunk line from Durban to Gauteng.

The company addressed the hurdle by mandating the Chairman of the Board of Transnet, at the time of construction, to exercise his, and the company’s, powers to expropriate the servitudes after issuance of a notice of expropriation in line with the South Africa constitution.

The new multiproduct pipeline system passes through an area with 95 wetlands and 49 rivers that entailed drilling of up to 1 mile (1.5 km) under a busy Gauteng highway.

The line, which was commissioned in 2017, nearly nine years after construction commenced, will pump 264,172 gallons (3 million liters) per hour, and large portions of it have been laid underground to minimize vulnerability to potential vandalism, damage and deterioration.

In its 2021 financial report, Transnet Pipelines Ltd said the company experienced “unprecedented number of product theft incidents that poses a significant risk to the security of supply to the inland market.”

In Nigeria, the Infrastructure Concession Regulatory Commission (ICRC), a State agency in the President’s office, previously said, although Nigeria’s 3,107-mile (5,000-km) petroleum pipeline network and the 1,740 miles (2,800 km) of natural gas pipelines remain the cheapest means of transporting the hydrocarbon products, the country’s increasing population growth has brought pipeline infrastructure within major settlements, hence becoming difficult to protect.

“Even more challenging is the encroachment to the pipeline right-of-way by buildings and major settlements,” ICRC observed in a previous report.

The encroachment of pipeline’s ROW in Nigeria is a major concern for the government largely because, as ICRC said, “These pipelines serve a wide range of purposes especially in transporting crude oil from the production fields to refineries and export terminals, transporting natural gas to power plants, cement and fertilizer plants and many more other industries that require natural gas for their operations.”

These pipelines, according to ICRC also “serve as a primary feeder to LNG [liquefied natural gas] plants that liquefy natural gas which serves as virtual pipelines and as such protecting these pipelines has now become a national security concern.”

Meanwhile, the West African Gas Pipeline Company Limited (WAPCo), the company that operates the 420-mile (678-km) offshore/onshore pipeline that transports gas from Nigeria to Ghana, Togo, Benin and other West Africa countries, also had to grapple with the issue of incomplete compensation for communities on the ROW for a gas transportation infrastructure, which together with the additional compression, was designed to meet a market potential of 450 MMcf/d (12.7 MMcm/d).

At one time, the World Bank, one of the project’s financiers, said “whereas all payments had been made for the RoW, compensation for the Adjido and Emeke communities in Nigeria was delayed due to outstanding court cases.”

“WAPCo has paid all outstanding land compensation payments in Benin, Togo and Ghana and amounts for the two communities in Nigeria are secured in a separate account and would be disbursed to the claimants as and when litigation is resolved,” the Bank said in a past update on the project.

WAPCo’s pipeline project covers total acreage of 494 acres (200 hectares), 70% of which lies in Nigeria with an estimated 3,000 households within the ROW.

Probably, to avoid a repeat of delays previously experienced in the acquisition of ROW for the pipeline project, the Nigerian National Petroleum Corporation (NNPC), a State-owned oil corporation that regulates the country’s petroleum industry, prioritized conclusion of easements for the 381-mile (614-km) Ajaokuta-Abuja-Kaduna-Kano 40-inch natural gas pipeline. NNPC fast-tracked the completion of the Environment Impact Assessment along the project route “for the purpose of acquiring right-of-way.”

The Corporation said communities to be dislodged from the Kogi, Federal Capital Territory (FCT Abuja), Niger, Kaduna and Kano states that bestride the US$2.8 billion pipeline project corridor, had been compensated in time to safeguard and ensure reservation of the ecosystem.

But acquiring ROW for Nigeria pipeline projects is not as big a problem as is keeping encroachers at bay during the operational phase of oil and natural gas pipeline infrastructure.

Meanwhile, in December 2021, the Islamic Development Bank announced a decision to provide 50% of the total cost for the front-end engineering design of the $90.1 million Nigeria-Morocco Gas Pipeline project (NMGP).

A portion of the Bank’s funds will be to support an Environment and Social Impact Assessment to ensure project compliance to all local and international environmental and social regulations and standards, and to “develop the land acquisition studies for agreeing with all countries to be crossed by the NMGP on the processes to obtain the rights-of-way for the pipeline to ensure smooth implementation of the works at a later stage.”

Elsewhere in East Africa, the implementation of the East African Crude Oil Pipeline (EACOP) by governments of Tanzania, Uganda and oil companies of Total and CNOOC has not been as smooth as initially envisaged.

The acquisition of ROW has been marred by delays in compensation and re-location of dislodged communities occupying nearly 13,100 acres (5,300 hectares) of land to pave way for the construction and operation of the pipeline.

“If residents do not clearly understand the relevant information about the project, they will antagonize its development. Yet, if they understand its benefits and consent through agreements, they become supportive of the project,” said Dalton Bakashabaruhanga, a project officer at the Uganda Consortium on Corporate Accountability (UCCA) in a previous interview.

UCCA has lately been pushing the Ugandan government “to revisit the land valuation exercise to address the gaps before completing the compensation process.”

Uganda has blamed the delay in making payments for the ROW to a delayed final investment decision and Uganda’s 2020 elections while some of the

affected families are yet to conclude court cases in connection with ownership of their lands.

In 2022, the focus “will be on land acquisition along with the detailed engineering, procurement and preparation works for main construction, which will itself start on the ground in 2023,” according to a statement by EACOP Ltd, a special purpose vehicle (SPV) by shareholders including TotalEnergies, 62%; Uganda National Oil Company (UNOC), 15%; Tanzania Petroleum Development Corporation (TPDC), 15%; and CNOOC, 8%.

“The EACOP project will ensure that all households affected by the land acquisition process are compensated in line with both the Laws of Tanzania and the International Finance Corporation (IFC) Performance Standards,” said EACOP Ltd.

“Each Compensation Agreement sets out the package of entitlements, both monetary and where appropriate in kind, including transitional support packages, replacement housing and access to livelihood restoration programs,” it said.

Completion of due payment for the ROW will pave way for access to land and the notice to vacate served to the Project Affected People (PAPs), according to EACOP Ltd.

But a March 2022 report by BankTrack, an international tracking, campaigning and civil society support organization targeting private sector commercial banks says, “valuation and compensation process for the land to be acquired for the project has been characterized by delays, insufficient provision of information to communities, harassment and irregularities.”

“Affected people have stated that they had only a basic understanding of the project’s stakeholder engagement process and felt that the project subcontractors had pressured them into signing valuation forms without ensuring their full understanding of this process,” the NGO says.

Contrary to international best standards on acquiring ROW, the report said landowners “reported that they did not receive copies of the documents they signed and that they were forced to sign the documents in pencil.”

“Local community representatives also report having been harassed, forced to sign different forms without clear explanation, stamp and sign empty forms, and fill valuation forms using a pencil but sign in ink,” the report said.

Because of the delayed compensation, uncertainty continues to engulf landowners on EACOP project ROW because cut-off dates were not honored, BankTrack said.

“Cut-off dates, after which compensation will not be paid for new permanent developments on land valued and demarcated for the project, were announced between April and June 2019 in Uganda, and between March and September 2018 in Tanzania, but ever since the cut-off dates were announced, affected households live in uncertainty,” it added.

“Two years after announcing the cut-off dates in Tanzania and one year in Uganda, compensation has still not been paid, and there is no certainty around when it will be paid as the process will only recommence once a final investment decision is made,” said BankTrack.

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