Monday March 7 2016

Discovery of oil in Uganda predates NRM

By William G. Naggaga

President Museveni at the second presidential debate said NRM discovered oil in Uganda. This was during discussions on the question of oil being a curse or blessing. Dr Kizza Besigye’s earlier response to that question was a veiled attack on Museveni’s government for its lack of accountable governance structures, which would automatically result in oil revenues going to private pockets and hence render oil a curse to the country. Of course, Museveni’s often repeated reference to Uganda’s oil as his oil also received chiding from other presidential candidates. Museveni brushed it aside but ‘blundered’ when he tried to give all the credit for the oil discovery to the NRM government.

A few years ago, I wrote in this column that the presence of oil was known to the British as early as Captain Lugard’s days in the 1890s. By the 1930s, geologists, engineers and other mineral experts had carried out test drills particularly in the Albertine region. The first Petroleum Act was enacted in 1957, after confirming that the deposits were substantial and would in some years to come be commercially viable. As of then the oil was safer in the ground.

There was then plenty of crude oil ‘oozing’ out of the Middle East, under the control by oil conglomerates in Europe, the United States, Canada and other Western countries. These oil oligopolies like the famed “Seven Sisters” in the United States, the Royal Shell and BP of Britain and Netherlands, Total of France, Agip of Italy, to mention just a few, literally controlled most of global oil exploration, production, refining and even retailing; a clean vertical integration which put producers and consumers alike at their mercy.

Britain also knew then that the oil in Uganda would be too expensive to exploit, given its distant location, over 800 miles to the nearest port of Mombasa and couldn’t compete with the cheaper crude oil in the Middle East, which was also geographically near to Western markets, especially after the opening of the Suez Canal in November 1869.
Milton Obote, who had known of these oil deposits back in the 1960s, started work on further exploration during his second presidency (1981 -85) but abandoned the exercise because of the proximity of the Albertine region to the Luweero triangle where NRM guerrillas were active.

The interest in Uganda oil during Museveni’s rule came as a result of a revolution in prices which had its origin in the early 70s when oil producers through Opec forced oil cartels to redress the imbalance in revenue sharing that had been tilted in favour of these foreign companies. The increased demand from countries like China in the last 20 years also put pressure on oil prices. The declining growth in China, however, has dampened oil prices to below $40 per barrel and should they continue to fall, Uganda’s oil may have to wait in the ground for a little longer.

All this goes to prove that oil is extremely volatile and one should never put all hopes in it, especially a new entrant like Uganda, located over 800 miles from the nearest sea port and where domestic consumption can hardly sustain a refinery. Also in the excitement about oil discoveries and how oil will transform the lives of the people of this country, Ugandans should not lose focus on how to prevent thieves from turning a national treasure into their personal heritage.

Ugandans must also be conscious of the fact that oil, being capital intensive, has low direct employment opportunities. It is also a big pollutant as we have witnessed in the Delta region of Nigeria. Oil, if well managed, will no doubt boost Uganda’s development and the government took a wise decision to embark on exploiting this vital industry.

Mr Naggaga is an economist, administrator and retired ambassador