Uganda Might Be Late For The Oil Party

Since October 2006, Uganda has proven crude oil reserves of 6.5 Billion barrels, of which 2.2 Billion is recoverable. The major players in the Oil and Gas market are Total E & P Uganda, Tullow Uganda Operations Pty Limited, and China National Offshore Oil Corporation (CNOOC), who are all holders of production licences issued in the six exploration blocks in Albertine Graben, located in the western arm of the Great East African Rift valley. With oil production expected to begin in 2020, there is a lot of activity in the oil sector.

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Regulations have came into force that are intended to ensure participation of indigenous Ugandans in the oil and gas sector. The regulations require any licensee, contractor and sub-contractor to give priority to goods and services that are produced and available in Uganda, and which are rendered by Ugandan citizens and companies during procurement. In addition, they as Ugandans are required to reserve the contracts for support industries like hotel and hospitality, food and beverages, security, transport and logistics etc. Plans to build an oil refinery in Kabaale District are underway, to refine oil for local and regional consumption and export the remainder by pipeline to Tanga in Tanzania.

The general population is engaged in debate on how the common man shall benefit from the black gold, while avoiding the oil curse that has befallen other oil producers especially in sub Saharan Africa.

However the biggest threat to Uganda’s oil sector is the changing trends in Europe, Asia and the Americas who make up some of the targeted markets of Uganda’s oil. With over 100000 barrels expected to be produced daily,  the local and regional markets cannot absorb all this oil.  The problem is with the real threat and adverse effects of climate change, the western world is already shifting to greener technologies. Countries like Germany, United Kingdom, India, France and Norway have set deadlines to end the sale of fossil fueled cars. Many other countries in the same block are expected to follow suit.

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In Europe,  the cost of operating electric vehicles is the same as that of operating a combustion engine vehicle. Electric vehicles have very few moving parts in their power units, which also means that the costs of maintenance due to wear and tear are reduced. With advancement in power storage battery technologies spearheaded by companies like Tesla and Rimac, owning an electric vehicle is destined to be cheaper. Traditional car manufacturers like Volkswagen are also embracing electric power. Mitsubishi has just discontinued the production of its most popular Lancer Evolution Marque in favor of an electric crossover. Swedish giant Volvo is expected to produce only electric models starting 2019.

This reinvention of technology backed by better power storage solutions shall boost the prevalence of greener energy solutions, like solar and wind. These shall power the charging stations needed to run the electric vehicles in addition to domestic household consumption.

A group of Civil Society Organizations (CSOs) working in the areas of Oil Governance and Transparency, implored government to end secrecy in the oil sub sector. In a joint petition to the Parliamentary Committee on Commission Statutory Authorities and State Enterprises (COSASE), that is investigating a controversial Shs 6bn oil cash payouts to 42 government officials (popularly dubbed “The Presidential Golden Handshake”). The CSOs argue that the increased secrecy in the petroleum sub-sector is a precursor for an ‘oil curse’.

Source: www.oilinuganda.org

This rapid change is set to deprive Uganda of a huge chunk of the market that we would have hoped to sell our oil to.  Some oil companies like Total, are already redefining their business models to become fully fledged energy companies that incorporate other forms of energy like solar and wind. Pass by a nearby Total station and you will notice that they are now selling solar equipment too.

So before we worry about how or where to reinvest the oil revenue and how to avoid the oil curse, the biggest hidden threat is whether we aren’t too late for the party. Our target market may have moved on to something better and greener. With the decreasing gap in technology transfer thanks to globalization, even the third world won’t be so far behind in catching up with the westerners.

 

 

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