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Uganda votes: oil blessing, oil curse?

February 17, 2011

ENERGY UGANDA

That old Africa oil chestnut is being discussed again: is it a blessing or a curse?

When it comes to Uganda, nobody really knows which way to bet yet and its people often shrug their shoulders when asked what impact it will have.

One reason for that, and a cause of concern for some, is the secrecy surrounding the deals the government has struck with the foreign firms in the country and a lack of transparency around much of the planning ahead of production next year.

The Pearl of Africa discovered oil reserves, now estimated by some to be 2.5 million barrel’s worth, in its Albertine rift basin near Democratic Republic of Congo in 2006.

I visited the shores of Lake Albert this week and found some locals had a vague hope things would improve for them when the oil starts pumping, while others said they would hate the oil companies if their lives did not change.

Elections on Feb. 18 will decide whether long-standing President Yoweri Museveni or his bitter rival Kizza Besigye will be the one to oversee the beginnings of a windfall that could haul the country into middle-income status. Foreign oil firms are watching closely — they have had their problems with the strong-headed Museveni but know little about Besigye.

As with others in the Africa oil club, graft is the big worry.

“The system of governance in this country is corruption,” Besigye told me recently. “It will be a disaster if that oil comes on to the market under the corrupt system we have today. I think it will be much better if the oil didn’t come than if it came with that kind of corruption.”

Museveni, in power since 1986, said last year he would personally sign every oil deal to stop corruption, which just made some analysts worry more.

It hasn’t helped confidence either that he has given his son, who heads an elite special forces unit in the country, responsibility for oil field security.

A dispute also rumbles on and on over tax owed on the sale of Heritage Oil’s Ugandan assets to Anglo-Irish Tullow Oil.

UGANDA-ELECTION/Wikileaks caused more jitters when one of their U.S. cables revealed the U.S. Ambassador had proposed travel bans on two Ugandan cabinet ministers after claims by Tullow that they were bribed by Italy’s Eni.

Tullow now expects to start producing oil and gas some time in 2012, a significant delay on earlier plans due to the tax row – perhaps another reason for companies eyeing another round of licensing this year to hesitate.

Some analysts plead patience, saying Uganda is naturally having a few growing pains but that its ministers and officials privately express a pretty fierce determination that theirs won’t be another Black Gold curse.

Bad examples of how to handle an oil windfall sadly aren’t hard to come by in Africa, with Nigeria the real dark spot.  The West African country’s much bigger reserves have triggered internal conflict, corruption and the paradox of plummeting living standards for millions of its people.

Congo Republic and Angola have fallen prey to oil wars and rights groups say Chad spent its oil cash on weapons. In Gabon and Equatorial Guinea, the petrodollars have often fuelled the selfish extravagance of small elites.

New kid on the rig, Ghana, has set a better pace.

One of Africa’s example economies,  it has delayed creating a legal framework setting out how to use the proceeds from overseas sales but it has taken advice on how to manage the sector from countries like Norway and has worked hard on making the business more transparent than elsewhere.

Unlike the Gulf of Guinea, that some analysts see supplying a quarter of U.S. oil by 2015, this side of the continent remains largely untapped and Uganda is something of a test case for East Africa and the Horn region. Neighbouring Kenya is stepping up exploration in the hope of finding oil.

What kind of example Uganda will set for its neighbours is not yet known.

Over to you. How do you think Uganda’s oil future will play out?

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