Oil in Uganda: What is the way forward?
BY PETER KAMURE<br><br>COMMERCIALLY exploitable oil in Uganda is now certain, with substantial discoveries in Bunyoro and northern Uganda (Amuru District), while exploration continues in Toro and West Nile.
BY PETER KAMURE
COMMERCIALLY exploitable oil in Uganda is now certain, with substantial discoveries in Bunyoro and northern Uganda (Amuru District), while exploration continues in Toro and West Nile.
While these discoveries have raised high hopes for the future of Uganda’s economy, big questions have arisen. The Bunyoro Kingdom wants a share of the oil reserves. In northern Uganda, local leaders want a share of the oil revenues for local development, but are dissatisfied with the Government’s handling of the matter.
They are unhappy that Heritage Oil and Gas Ltd, one of the international oil companies prospecting for oil in Uganda, had quietly started oil drilling in the area; that the armed forces are restricting access to the oil field, citing national security as justification; and that the oil company is bringing in outside workers thereby denying the local people employment.
In West Nile, Neptune Uganda Limited, another international oil company prospecting in Uganda, reportedly said the border conflict between Madi-Okollo and Terego counties was obstructing exploration, appealing to the parties concerned to end the conflict.
Further questions arose as to where the oil refineries will be built. On the international front, the borderline between DR Congo and Uganda on Lake Albert became an issue since underneath lies oil reserves.
I would like to put some of these issues into perspective, grouping them under six headings:- transparency vs national security, Ownership, Revenue Sharing, a national oil fund, responsibilities of the multinational oil companies, and environmental concerns
The lack of transparency in dealing with the exploitation of oil reserves; and the way accruing revenue is utilised has been cited as a major source of discontent leading to instability and indeed armed conflict in certain parts of the world
The consensus is that ‘the broader the political cooperation and public consensus, and the greater the transparency in the management of oil revenues, the greater the chance that the country will remain stable’.
It is important that the interests of the people in the oil producing area are taken into account to allow for equitable and sustainable sharing of oil revenues.
Open public information and debate about Uganda’s oil reserves, the oil exploitation agreements with the international oil companies and how the accruing revenues will be utilised for the people of Uganda are therefore called for. Parliament should be given access to the agreements the Government has signed with oil companies so that it can vet them.
Oil reserves and installations constitute a strategic resource that requires special attention and protection by the Government. This is more so because, not only must the national resource be protected, but the people and environment must also be protected from oil spillages and other such dangers. The Government, therefore, needs to strike a balance between how these two key concerns of transparency and national security are addressed.
It is generally accepted that private ownership is more efficient than a government-owned system. But since the exploitation of oil reserves is such a big business requiring large amounts of capital on the one hand; and strategic national interests are involved, invoking the public private partnerships way of doing business provides a solution.
The private sector should partner with the Government to handle the oil industry.
The sad Nigerian experience with its oil wealth has at issue the equitable sharing of the oil wealth among its people. The Nigerian Constitution signed in April 2000 provides that oil-producing states get up to 13% of oil revenue paid to the federal government, as against the 3% they previously received.
In Uganda, the Mining Act of 2003 provides for 3% of loyalties collected to be paid to the oil producing areas.
This should be revised to at least 13% to take into account the high expectations generated among the people where the oil has been discovered.
A Uganda Oil Fund would be beneficial.
The goals of an oil fund are:- to restrain the Government from misappropriating oil revenues; isolate the national economy from large influxes of oil revenue thereby protecting the non-oil sector of the economy; accumulate revenue for periods when oil prices are low; and save a portion of the wealth for the future generation. This will also help to minimise the effects of the cycle of ‘high revenue / high expectations / high expenditure followed by an oil market slump / a decline in revenues followed by social unrest resulting from fiscal and budgetary adjustments’.
Multinational companies have for years been accused of exploiting natural resources while doing nothing for the people from where the resources come from. Besides the royalties and other revenues they pay to governments, the oil companies have a responsibility to better the lives of the people from where the oil is being extracted. Such development work would include the construction of roads and bridges, building of health centres, schools, portable water facilities and power generation.
Environmental issues associated with oil exploration which need to be addressed include how to deal with oil spills, gas flaring, deforestation, effects on the wildlife, waste management from oil exploitation in order to maintain harmony in the rich bio-diversity where the oil is extracted.
Uganda’s new found wealth should be a blessing to the people and not become a curse. The different stakeholders, especially the Government, should play their parts so as to land Uganda into the next phase in our development — an economy based partly on oil revenues, while not ignoring the traditional agricultural sector.
The writer works with the African Development Bank
COMMERCIALLY exploitable oil in Uganda is now certain, with substantial discoveries in Bunyoro and northern Uganda (Amuru District), while exploration continues in Toro and West Nile.
While these discoveries have raised high hopes for the future of Uganda’s economy, big questions have arisen. The Bunyoro Kingdom wants a share of the oil reserves. In northern Uganda, local leaders want a share of the oil revenues for local development, but are dissatisfied with the Government’s handling of the matter.
They are unhappy that Heritage Oil and Gas Ltd, one of the international oil companies prospecting for oil in Uganda, had quietly started oil drilling in the area; that the armed forces are restricting access to the oil field, citing national security as justification; and that the oil company is bringing in outside workers thereby denying the local people employment.
In West Nile, Neptune Uganda Limited, another international oil company prospecting in Uganda, reportedly said the border conflict between Madi-Okollo and Terego counties was obstructing exploration, appealing to the parties concerned to end the conflict.
Further questions arose as to where the oil refineries will be built. On the international front, the borderline between DR Congo and Uganda on Lake Albert became an issue since underneath lies oil reserves.
I would like to put some of these issues into perspective, grouping them under six headings:- transparency vs national security, Ownership, Revenue Sharing, a national oil fund, responsibilities of the multinational oil companies, and environmental concerns
The lack of transparency in dealing with the exploitation of oil reserves; and the way accruing revenue is utilised has been cited as a major source of discontent leading to instability and indeed armed conflict in certain parts of the world
The consensus is that ‘the broader the political cooperation and public consensus, and the greater the transparency in the management of oil revenues, the greater the chance that the country will remain stable’.
It is important that the interests of the people in the oil producing area are taken into account to allow for equitable and sustainable sharing of oil revenues.
Open public information and debate about Uganda’s oil reserves, the oil exploitation agreements with the international oil companies and how the accruing revenues will be utilised for the people of Uganda are therefore called for. Parliament should be given access to the agreements the Government has signed with oil companies so that it can vet them.
Oil reserves and installations constitute a strategic resource that requires special attention and protection by the Government. This is more so because, not only must the national resource be protected, but the people and environment must also be protected from oil spillages and other such dangers. The Government, therefore, needs to strike a balance between how these two key concerns of transparency and national security are addressed.
It is generally accepted that private ownership is more efficient than a government-owned system. But since the exploitation of oil reserves is such a big business requiring large amounts of capital on the one hand; and strategic national interests are involved, invoking the public private partnerships way of doing business provides a solution.
The private sector should partner with the Government to handle the oil industry.
The sad Nigerian experience with its oil wealth has at issue the equitable sharing of the oil wealth among its people. The Nigerian Constitution signed in April 2000 provides that oil-producing states get up to 13% of oil revenue paid to the federal government, as against the 3% they previously received.
In Uganda, the Mining Act of 2003 provides for 3% of loyalties collected to be paid to the oil producing areas.
This should be revised to at least 13% to take into account the high expectations generated among the people where the oil has been discovered.
A Uganda Oil Fund would be beneficial.
The goals of an oil fund are:- to restrain the Government from misappropriating oil revenues; isolate the national economy from large influxes of oil revenue thereby protecting the non-oil sector of the economy; accumulate revenue for periods when oil prices are low; and save a portion of the wealth for the future generation. This will also help to minimise the effects of the cycle of ‘high revenue / high expectations / high expenditure followed by an oil market slump / a decline in revenues followed by social unrest resulting from fiscal and budgetary adjustments’.
Multinational companies have for years been accused of exploiting natural resources while doing nothing for the people from where the resources come from. Besides the royalties and other revenues they pay to governments, the oil companies have a responsibility to better the lives of the people from where the oil is being extracted. Such development work would include the construction of roads and bridges, building of health centres, schools, portable water facilities and power generation.
Environmental issues associated with oil exploration which need to be addressed include how to deal with oil spills, gas flaring, deforestation, effects on the wildlife, waste management from oil exploitation in order to maintain harmony in the rich bio-diversity where the oil is extracted.
Uganda’s new found wealth should be a blessing to the people and not become a curse. The different stakeholders, especially the Government, should play their parts so as to land Uganda into the next phase in our development — an economy based partly on oil revenues, while not ignoring the traditional agricultural sector.
The writer works with the African Development Bank