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[ELLA Community blog series] Where is the Problem? Skepticism about Uganda’s “Oil 2020″ dream

This article has been written by Sabastiano Rwengabo, research fellow at the Kampala-based regional think tank Advocates Coalition for Development and Environment (ACODE). Rwengabo leads research on the Governance of Oil and Gas Wealth in Uganda and East Africa, and is a member of the ELLA Community. He has taken part in the Learning Alliance and Study Tour on Oil and Gas Local Content, and was an  ELLA LEAP Award recipient. In the following article, he examines the skepticism of part of Uganda’s population about the plans to start oil explotation by 2020, after a series of complications and delays. 


INTRODUCTION

A decade-plus has passed after Uganda announced commercial petroleum reserves in the “ The Albertine Graben”, but problems have arisen: infrastructure underdevelopment, insufficient governance frameworks, institutional underdevelopment, and sheer immensity of the task exploiting a capital-intensive, technology-intensive, and highly political resource (building a mini-refinery, export pipeline, and other related infrastructure within and beyond Uganda).1 Expectations of First Oil [extraction] in 2014 were revised to 2018, and now 2020 / 20212. It remains unclear whether the Oil 2020 estimate is based on a clear plan, a reason why some Ugandans remain unconvinced. According to Hon. Elly Karuhanga, “ The Problem of Uncoordinated Troop Movements in Uganda stymies the Oil 2020 Dream”.

This article examines the skepticism of Hon. ELLY KARUHANGA, Chairperson of Uganda’s Chamber of Mines and Petroleum, about First Oil in 2020. Karuhanga insists that unless “ Team2020” is established, and charged with the responsibility of planning and implementing the immense task ahead, including capacity to invest a whopping US$ 20 billion in an economy where the highest investment was about US$ 1.5 billion on Karuma Dam, Oil 2020 will elude Uganda.

Worker at oil RigWorkert at oil rig by Lindsay Gira@Flickr


KARUHANGA’S SKEPTICISM

During ACODE’s 7th Annual High-Level Policy Dialogue on the National Budget, held on 4 May 2017 at Sheraton Kampala Hotel, Karuhanga expressed skepticism that sent apathy-waves across the room and possibly on television. His skepticism underscored key issues. First, Uganda develops good frameworks but hardly implements them. The National Oil and Gas Policy (NOGP), 2008 and accompanying laws (2013, 2015)3 need not delude many on the Oil2020 dream. Second, the necessary planning, infrastructure undertakings, negotiations about and actual construction of a refinery and oil export pipeline, central processing facilities, an expected 400 oil wells, , and other structures remains too slow. Third, despite being “ gifted by nature”, Uganda’s immense mineral potential that can engender as good infrastructure as Europe and South Africa remains wanting. Karuhanga has, for eight years, requested for [a paltry] US$ 20 million to explore Karamoja region in vain. Yet, “Karamoja alone can solve Uganda’s problems”.

Former president of Tullow Uganda, Heritage/ Herdman that discovered petroleum in 2006, and former State Attorney, Karuhanga claims knowledge of the petroleum industry, government, and private sector dynamics. He challenged government to explain when, which month in 2020, they expect First Oil, but stated that they “cannot work backward” . Karuhanga explained why Oil2020 is hot air:

■ The ministry of Justice and Constitutional Affairs lacks trained professionals in petroleum who can negotiate the 40 Uganda-Tanzania interstate/ bilateral agreements needed before laying the Uganda–Tanzania Crude Oil Pipeline (UTCOP), that will transport crude oil from the Albertine Graben to Tanzania’s Tanga Port, over an approximate 1,410 kilometres’ distance.

■ The pipeline will traverse habited areas. Affected people must be resettled. But there are complexities in land acquisition and compensation; resettlement processes remain un-concluded.

■ The sector will expectedly employ about 16,000 laborers during laying of the pipeline. They have not been recruited. Their camps have not been established. Facilities and equipment for their work are missing. No ongoing drive to recruit a whopping 16,000 people.

■ Services – feeding, clothing, sanitation, camping, etc – needed along the pipeline route have not been planned, let alone mobilized. No private-sector arrangement has been undertaken to drive local content herein – limited localcontent awareness. Yet only two years remain to First Oil.

■ Uganda’s investment-absorption capacity and experience is low. The highest investment Uganda has ever had – Karuma Hydroelectric Power Station, a 600 megawatts hydroelectric power project under construction on the River Nile at Karuma falls – suffered delays. With about US$1.69 billion invested, the project’s plan was hatched in 1995. But construction started in August 2013. Is the economy capable of absorbing US$ 20 Billion in two years? Where is capacity to manage this level of investment given previous experience from major infrastructure investment

■ Many agreements, limited capacity: About 40 Uganda-Tanzania bilateral agreements will be reached over UTCOP. No known Law Firm has been contracted to develop them, before negotiations can start.

■ Equipment not in place: Rigs and other equipment needed for 400 wells – in three years – are many: if importation and fixing has not started, even if First- Oil expectations were extended to 2021 (4 years), it implies constructing 100 wells per year – about 10 per month, at least one every three days! This is impossible.

■ Two Central Processing Facilities (CPFs), Refinery, Airport, most Roads, and other infrastructure are not under construction. These pre-requisites missing, Karuhanga asks why Ugandans are duped to believe Oil2020, and wonders: “Where is the problem?” There is a problem… He called it “The Problem of Uncoordinated Troop Movements in Uganda”, which consists in limited interinstitutional, inter-agency, inter-ministerial coordination and cooperation on petroleum issues.


CAN WE SOLVE THE PROBLEM?

Karuhanga recommended creation of “ Team2020” , a “ Dream Team” composed of dedicated and “ genuine government officials” , and ten sub-sectors from the private sector. The team should plan, execute, and oversee the sector toward Oil2020. Karuhanga stated that he had brought this to the President’s attention. This team would “move our country forward”, and solve the “problem of uncoordinated troop movement.” Some participants seemed to view the “problem” as a leadership and coordination problem. Others believe it cuts across all sectors. Careful steps help escape avoidable mistakes or venture into areas Uganda is unprepared for. But delays rarely beget efficiency. The Kampala-Entebbe Express Highway, Karuhanga cited, delayed and it was hardly efficient. Delays in Karuma hydroelectric project will hardly beget efficiency. Thus, the unpredictability of Uganda’s petroleum gnaw at the marrow of sectoral and development efficiency.4


NOTES

1 Luke Patey, 2015, “Oil in Uganda: Hard bargaining and complex politics in East Africa”, OIES Paper: WPM 60, Oxford, UK: OIES.
2 Republic of Uganda, 2008, National Oil and Gas Policy for Uganda, Kampala: ; Sam Hickey, et al, 2015 b, “The political settlement and oil in Uganda”, ESID Working Paper No. 48. Manchester: ESIDRC.
3 Republic of Uganda, NOGP; 2013a, Petroleum (Exploration, Development and Production) Act; 2013b, Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act; 2015, Public Finance Management Act 2015, Entebbe: UPPC.
4 The proceedings of the Dialogue are to be found HERE. Hon. Karuhanga appears around Minute 2:13:20.

The opinions expressed in blog entries by ELLA Community members are theirs alone unless otherwise stateted, and do not reflect the opinions of The ELLA Network. This article is part of the Research Blog Series, which focuses on current research or analysis on ELLA themes conducted by our community members.
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