Tuesday April 10 2012

Mixed reactions from Uganda as Kenya strikes oil

Journalists at an oil site in Hoima District.

Journalists at an oil site in Hoima District. File Photo 

By Ismail Musa Ladu

The good news that has come out of East Africa recently is the discovery of oil in northern Kenya—precisely in the northwest Turkana region. And the bad news, according to economic analysts is that, should Uganda dare to delay any further the explorations and production of its oil, Kenya will certainly leap frog it.

“This is a wake call,” said Mr Gideon Badagawa, an economist and the executive director of the Private Sector Foundation Uganda (PSFU), the apex body representing the interest of the private sector in Uganda.

According to Mr Badagawa, given Kenya’s shrewdness, chances are that it could move much faster in drilling her oil before Uganda begins to commercially exploit hers in the next three or four years, leaving Uganda in the dark as Kenya enjoys the limelight that comes with oil explorations and production.

“We must leave politics out of this and look at issues such as equipping Ugandans with skills and preparing people to grab the opportunities that come with oil and gas discoveries,” said Mr Badagawa.

And if this does not happen soon, he believes that Kenyans will take over the benefits that the oil discovery presents, since her people will be the most prepared when the country’s oil wells begin to flow in the next three or four years.

The National Economy committee Chairperson, Mr Stephen Biraahwa Mukitale last week, said it became apparent that it was only a matter of time before Kenya discovered her oil given her geographical links in terms of terrain with the neighbouring countries that have since discovered oil.

He said it is important that the neighbouring countries that have discovered oil, among them Uganda, Southern Sudan, Ethiopia, DR Congo, and now Kenya, join forces rather than single handedly exploit their oil resources.

The Buliisa County Member of Parliament is also of the view that Kenya still has a long way to go. He argues that whereas Uganda is headed for production of her oil in the next few years, Kenya still has to first ascertain whether her discovered oil deposits are huge enough for commercial exploitation.

Announcing the discovery of the oil three weeks ago, President Mwai Kibaki said that the commercial viability of the oil find in the northwest Turkana region is still uncertain, although he welcomed the news, describing it as “a major breakthrough.”

However, Mr Kiraitu Murungi, Kenya’s energy minister, was quoted by Kenya’s leading newspaper, the Daily Nation, as saying that Tullow informed him that Kenya’s oil deposits could be bigger than Uganda’s, although the oil firm is reluctant to confirm that assertion, saying it is too early to determine that.

This and other voices that appear to rush or put Uganda’s exploration and production ventures under pressure should, according to the legislator not be taken serious, for it is not in the long term interest of government and its people.

“All that talk is the voices of the oil investors and their representatives, who would be so eager to exploit the country’s important resource even within five years as opposed to 25 or more,” the MP who hails from the oil rich region said.

Mr Biraahwa, also said government must guard against taking a decision that is based on the oil discovery by the neigbouring country, arguing that the talks pitting Kenya’s oil discovery against the one of Uganda are aimed at hoodwinking the government into entering short term deals with the oil investors as opposed to long term oil benefits that the country is yearning for.

He said: “The biggest challenge the government is facing now with the discovery of Kenya’s oil is striking a balance between the short term gains and long term interests of the country.”

Experts view
But, other economic analysts like Prof Augustine Nuwagaba, says the repercussions of Kenya oil discovery present a serious threat to the young but nascent oil sector in Uganda.
Speaking to Prosper, the professor said: “The discovery (of oil in Kenya) will intensify geo-politics in terms of attractiveness of the region.”

By that, Prof. Nuwagaba means that Kenya could end up being more attractive to investors as already is the case on many fronts. According to the Makerere University Professor, the country should both speed up its exploration and production before Kenya takes away the leverage Uganda has been enjoying since 2006 when it became obvious that it has huge oil deposits—to last at least two decades.

He said although, it is good news for the regional countries to discover oil, he warned that it can be potentially dangerous—in a sense that it can trigger disharmony among the EAC member states.

“East African community collapsed in 1970s because other countries had the leverage at the expenses of others. So, if this matter (oil discovery in the region) is not handled well, it could threaten the community’s existence once again,” Prof. Nuwagaba warned.