Uganda Oil
Uganda Oil-
How much oil (and gas) does Uganda have, and where is it?
The oil fields found so far are estimated to contain deposits of around 2.5 billion barrels of oil. It is unlikely that all of this will be extracted because as an oil well empties it becomes harder—and therefore uneconomic—to pump out the remainder. The government has recently said that 1 billion barrels can be extracted from what has been discovered to date, but it is possible that more discoveries will be made in future.
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Who does the oil belong to?
According to Uganda’s Constitution, as amended in 2005, “the entire property in, and the control of, all minerals and petroleum in, on or under, any land or waters in Uganda are vested in the Government on behalf of the Republic of Uganda.” In simpler terms, the oil belongs collectively to the Ugandan people, but the government, acting on behalf of the people, may extract it for the national good. Most of the world’s countries treat mineral resources in much the same way.
International oil companies engaged in exploration and production in Uganda do not own the oil. Rather, they own the rights to a share—as determined in Production Sharing Agreements —in the profits from selling it.
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What is the plan for producing, refining and selling the oil?
The government of Uganda and President Museveni himself have strongly and consistently advocated building an oil refinery in Uganda to supply the country with fuel (probably also exporting refined products to Rwanda and some parts of Kenya and Tanzania), and to stimulate the development of a local, petrochemicals industry. This is now set to happen, although the details remain unclear. Government policy appears to be to export any crude oil that is surplus to the requirements of the refinery.
But the government is not alone in the driving seat of oil production.
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Are international oil companies trying to cheat Uganda?
Oil companies, like any other business, exist to make a profit for their shareholders. Very few people nowadays believe that ‘profit’ is a dirty word or that making a profit through business is inherently wrong. There is, nevertheless, widespread suspicion of oil companies—especially multinational companies working in developing countries—for several good reasons:
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Who are the main international oil companies in Uganda?
The overall pattern of recent international oil company involvement in Uganda has been a progression from rather small fish to giant companies.
Several relatively small companies started explorations in the late 1990s, and during the 2000s some of these companies changed hands or sold on their licences to others. (See our TIMELINE for more details.) Commercial quantities of oil were discovered in 2006 in exploration blocks that were jointly licensed to the Anglo-Canadian Heritage Oil and the Anglo-Irish company, Tullow Oil PLC. Tullow, at that time, was a relative newcomer to Uganda and the largest of the companies involved in exploration.
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Are Uganda’s Production Sharing Agreements with oil companies bad for Uganda?
Details of the Production Sharing Agreements have not been fully disclosed, despite the long-running efforts of civil society activists and some MPs to have them made public, so it is very hard to say. Government officials have claimed all along that the terms of the agreements signed with various companies were good for Uganda. In 2010, however, a UK-based NGO, PLATFORM, and Uganda’s Civil Society Coalition on Oil co-published a hard-hitting report (see our RESOURCES section for details), claiming that the deals allowed excessive profits for the oil companies and that the Government of Uganda was selling the country short.
Only full disclosure would allow any final judgment to be made.
Yet it is worth noting that the bargaining position of the government has improved considerably since it signed the first PSAs.
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President Museveni’s administration has outlined its broad priorities on many occasions. Following the example of Norway and some other oil producing countries, part of the revenues will be placed in a Petroleum Fund {INSERT LINK TO GLOSSARY TERM} for overseas investments, in order to protect Uganda’s economy from the adverse effects of a domestic spending boom, and to save some of the money for future generations. Part of the revenues will be invested in infrastructure projects in Uganda to aid general economic growth and diversification.
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Who will benefit most from Uganda’s oil, and who might suffer?
Natural resource wealth often tends to further enrich existing elites –those with the knowledge, connections and power to take advantage of the opportunities oil presents—without doing much for the ‘man in the street’ or the woman labouring in the field.
Most vulnerable are those many Ugandans who are already poor, uneducated or only semi-educated, struggling to live from smallholder farming. Such people may find themselves squeezed between their skills deficit and increased concentration of farmland if reduced competitiveness of agriculture encourages a shift to large-scale farming.
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How will Uganda’s oil discovery affect its relations with neighbouring countries?
It is very hard to say. The prospect of Uganda becoming an exporter of refined oil products to neighbouring countries is real and enticing. Greater prosperity in Uganda would likely stimulate regional trade in other products, with gains all round. Doubly-landlocked Rwanda could certainly benefit from cheaper oil imports direct from Uganda.
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