Can the next phase of the oil project deliver shared prosperity and sustainable development?

After more than 15 years of waiting, Uganda is closer to extracting its first oil following the signing of the Final Investment Decision (FID) by joint venture partners CNOOC Uganda Limited, TotalEnergieis EP Uganda and the Uganda National Oil Company (UNOC) last week.

An estimated $10 billion is expected to be invested in the projects – Tilenga, operated by TotalEnergies, Kingfisher by CNOOC and the Tanzania cross-border pipeline, built and operated by the East African Crude Oil Pipeline company (EACOP). The construction phase is expected to start in 2025.

The development is historic achievement for the landlocked country and its 46 million citizens considering the delays since 2006 when the commercial oil and gas reserves were discovered in the Albertine Graben, where there is more than 6.5 billion barrels of crude oil and a further 1.4 billion recoverable.  

Setbacks included tax disagreements and lack of infrastructure, then at some point the pipeline route, initially planned to pass through Kenya, changed to Tanzania, delaying the country’s journey to extract the black gold. However, the next phase of the project comes with its own tests, and how government navigates them is vital to ensure that every stakeholder benefits as and when they ought to.

Already, the key officials are promising just that. During the signing of the FID, the Minister of Energy and Mineral Development, Ms Ruth Nankabirwa, observed that the 60,000 barrels per day refinery will improve security of supply of petroleum products, and support industrialization through growth of petrochemical based industries.

According to the government, the project is also expected to employ more than 60,000 people thanks to the local content aimed at achieving optimal participation of Ugandans and Ugandan enterprises with a focus on employment, provision of goods and services, capacity building, enterprise development, and transfer of knowledge and technology.

 “The planned 15-20 billion-dollar investment after the FID will facilitate Uganda’s GDP growth by 22 per cent and also unlock over 60,000 jobs where over 57 per cent will be given to Ugandans, attracting $4.8 billion,” Ms Nankabirwa said then.

The oil will be pumped from Uganda in a 1,443-kilometre heated pipeline through Tanzania to the Indian Ocean port of Tanga. Sectors such as education tourism, health, banking and finance are also expected to benefit.

TotalEnergies chairman and CEO Patrick Pouyanne lauded the signing, saying: “This is a day of happiness for joint venture partners in the Lake Albert development projects…The development of Lake Albert resources is a major project for Uganda and Tanzania, and our ambition is to make it an exemplary project in terms of shared prosperity and sustainable development.”

According to the contracts, Total Energy controls a 57% stake in the upstream project and a 62% in the pipeline, EACOP has 8%, while Uganda and Tanzania each hold 15%.

Regulatory framework and accountability systems are still questionable despite Parliament passing several legislative polices to pave way for the extraction. If these are not swiftly addressed, the shared prosperity and sustainable development might not be achievable. 

No doubt the infrastructure so far has seen many advantages for that trader who can now access the markets, it has created more business opportunities, but in the next phase of the project, will they eat at the king’s table or feed on the crumbs? 

“Our politicians have had their own contributions, including at times asking of very difficult questions! Let me hope the answers were provided and room for bickering minimized. Those questions must have contributed to the healthy final debate and the quality of the FID. It would have been difficult to conclude without talking about the enabling laws. These have been many worked on under different parliaments. All of them added their brick, starting with the initial upstream decisions and the subsequent downstream conclusions and all that must have made important and significant contribution without which the final FID may perhaps not been possible in its current state,” Mr Emmanuel Lumala Dombo, the Directorate of Information and Publicity, NRM Secretariat, reassured.

A 2013 Center for Strategic and International Studies shows that Chad, Sudan, and the Congo’s oil revenues were strongly correlated with worsened political and economic outcomes. According to Freedom House, all three countries had seen their levels of civil and political freedom decay after discovering oil.

 “In the absence of the rule of law, multiple layers of checks on power, and other innovative institutions of accountability, an autocratic ruler and his thugs can easily exploit and privately seize the oil sector and use their newfound wealth to squash competition and strengthen their already considerable power,” Jack Mosbacher states in his article ‘Fighting the Resource Curse: Uganda’s Pivotal Moment’

Can that be different for Uganda? When the oil discovery was announced, it was just a year after Parliament had amended the Constitution to scrap term limits, extending President Yoweri Museveni’s tenure in office. Now years later, the FID is signed at a time when the presidential age limit has also been removed. The NRM government maintains that they are legitimately elected, owing to the periodic elections that they have kept winning convincingly.

 Environmental concerns have also been raised by several activists in the oil projects. Activists argue that the projects have grave consequences on the surrounding communities. President Museveni has also tackled the matter in an article on the UK trade deal.

“Collective pressure should be brought to bear on western countries to reconsider their blanket ban on fossil fuel investment in Africa. Ruling out funds for gas and carbon capture while encouraging it in Europe smacks of double-standards. It forces poverty on Africans whilst doing nothing to increase access to power, reduce electricity costs, or wean dependence from heavy fuels such as diesel,” the President states.

However, according to TotalEnergies, environmental and social impact assessments have been carried out in compliance with the exacting standards of the International Finance Corporation.  The company observes that third-party reviews have also been conducted to ensure that the projects are compliant with the best social and environmental practices. Total and the Uganda government made provisions for renewable energy projects in the oil deal to protect the communities.

As Uganda looks forward to 2025, the expectations are high. The country can learn from its past mistakes and those of other countries to effectively position itself among the oil producers. It is also time for players in different sectors to seize the opportunities, hoping that there is fair and equitable advantage for all. It has been a long wait, let’s not regret it. Let’s make it count.