Central Africa is not the first place energy people traditionally think of when it comes to oil. Now it appears Uganda may have up to 2 billion barrels of the stuff, according to their government. The question is what to do about it.
Uganda would like to have a refinery, although some oil companies say this is a mistake. Uganda could use the energy, but not as much as would be produced. They believe the oil should be exported, although it is waxy and difficult to pass through a pipeline. A pipeline to the Indian Ocean would cost $1.5 billion; investors interested in helping Uganda, according to the Economist, include Iran, the US and China.
All this talk of what to do with the oil when it finally comes out of the ground is less important than setting up good government policies before serious drilling begins. Museveni’s government faces a number of hurtles if it is to do things right. But they can get it right.
The first question is income transparency: the two Western companies, Heritage and Tullow, who own the drilling rights have said they are open to disclosure. Now the government must decide whether it can resist the temptation of opacity and probably corruption, and sign on to EITI (Extractive Industries’ Transparency Initiative).
Dow Jones newswire has noted Tullow and Heritage have reached out to local communities, which, having heard about what happened when oil was discovered in Nigeria and Angola, are understandably worried. There are issues of more general public input.
“A dispute is already brewing over who controls rights to minerals in the Lake Albert area and how revenues will be distributed between the government and leaders of the Bunyoro Kingdom – the ethnic grouping that occupies districts on the lake’s eastern shore. Local communities ‘say they have been completely left out of the process and are not satisfied,’” Dickens Kamugisha, chief executive of the African Institute for Energy Governance, a non-governmental organization based in the Ugandan capital, said in the same article.
An especially encouraging note: New Vision (of Uganda, reported by allAfrica.com) says,
“Under the mining law, the Government takes 80% of the revenues, the local government 17%, while the land owner takes 3%.”
This distribution of income is different than most other countries, where the constitutions cede all mineral rights and income to the national government. Assuming by “landowners” they mean those living on the land (as opposed to a wealthy absentee deed-holder), this, plus environmental controls and transparency, means that people in the area could actually profit from the oil extraction.
Uganda’s government will hopefully realize that they have the chance to effect that rarest of economic phenomena — with public inclusion, their oil bonanza could actually financially help the country and the people.
