Prime
Uganda’s new oil deal: Let’s confront the brutal facts
Brian Mukalazi
What you need to know:
...it is upon our patriotic men and women in positions of power to confront the brutal facts and avoid the so-called ‘oil curse’.
A few weeks ago, I wrote a commentary in these pages about Uganda’s oil and its eminent fall in value by the year 2050. Of course, my unsettling prediction remains a “maybe” and who knows, Uganda’s oil could flourish, boost our economy and push us further unto the development ladder even beyond 2050.
Like many Ugandans, I truly believe that this new oil deal, backed by the Final Investment Decision (FID) recently signed between Uganda and the joint venture partners, will be a game-changer and a step in the right direction in the achievement of our economic development aspirations.
However, despite these confident assertions, Ugandans should be aware that if we are to derive any meaningful benefits from this oil deal, we need to be candid and confront some brutal, ugly facts. Our leaders need to look harder and ask: “What do we have to do or change in order to benefi t from this deal as a country?”
In pursuit of that, I would expect us to start by examining the project itself. The project, which will include the development of two oil fields on the shores of Lake Albert and the construction of a 1,445-kilometre East African Crude Oil Pipeline (EACOP), is estimated to require an investment of about $10 billion, with production anticipated to start in 2025.
But many questions, with few answers, have been raised regarding the source of fi nancing for this $10 billion investment. This makes me skeptical because I am already aware that at least 11 international banks, three insurance companies and the African Development Bank have all ruled out supporting the project.
Our government should, therefore, probe this risk and engage the joint venture partners about the same. Research indicates that this would not be the fi rst project to reach a fi nal investment decision without all the finances in place. A number of similar projects, such as the Lamu coal plant in Kenya, were subsequently cancelled.
Next question: What is in it for the local contractors? The New Vision recently reported that only about 13 per cent of the entire oil cake for the Kingfi sher Project (one of the projects under the deal) will be shared among local contractors, with about 85 per cent expected to fly abroad, along with the foreign contractors.
If the same is translated to the other projects under the deal, then, I am afraid to say that the deal may not be worthwhile. Aspects of inadequate capacity and knowledge have been highlighted for this mishap but has the Petroleum Authority of Uganda conducted the required needs assessments to evaluate and develop local content?
And how about the environmental concerns? The deal, especially EACOP, has come under intense scrutiny over what many environmentalists term as a total environmental breach. They argue that EACOP poses a multitude of risks – to communities, nature, wildlife and the climate.
Then come the monster of corruption: How can we talk about a project as large as this without considering corruption? In my opinion, Uganda has the tools – regulations and institutions – to fight corruption, but lacks the commitment and will to do so. And if there’s a slight change in our priorities, the results will be enormous for our country.
Like I have said before, this oil deal presents our country with a great opportunity to fi nally make that leap into the middle-income category or even beyond. But it is upon our patriotic men and women in positions of power to confront the brutal facts and avoid the so-called ‘oil curse’. We are counting on you!
Mr Brian Mukalazi is the country director of Every Child Ministries Uganda. [email protected]
