Uganda’s Oil resources: The writing on the wall

On April 11, Uganda witnessed the monumental signing of the East African Crude oil Pipeline (EACOP) deal between the governments of Uganda, Tanzania and French Oil giant, Total. The tripartite agreement is a composition of the Tariff and Transportation Agreement, host government agreement and the shareholders agreement. The signing of the pipeline deal alleys the fears of those that still think that oil production is a myth and going forward the Petroleum Authority of Uganda has launched the Resettlement Action Plan for the EACOP which gives a go ahead for land acquisition activities that had stalled due to the Covid-19 pandemic. 

Cumulatively, all activities for EACOP development are set to inject an investment of about $15 billion in Uganda’s economy. What are the economic implications of such an investment?Construction of the EACOP is estimated to cost about $3.5 billion. Uganda’s current Gross Domestic Product (GDP) is estimated to be over $38 billion which makes the EACOP alone about 9.2 per cent of Uganda’s GDP. Although the investment will evenly be spread in both Uganda and Tanzania, it still remains a significant injection to the economy. Nigeria is Africa’s largest economy in terms of GDP and this performance is greatly inclined to its oil sector which accounts for about 80 per cent of Nigeria’s GDP. 

With such a heavy reliance on one sector, it becomes extremely difficult to discuss the context and structure of such an economy without putting into consideration the biggest contributor, both in terms of GDP and foreign exchange earnings. The EACOP is only but a part of a whole puzzle, there are more developments in line as Uganda gradually moves towards reaping the benefits of oil. These include oil roads, the Kabale International Airport, the oil refinery, central processing facility and development of the downstream sector to make the oil commercially viable. This demonstrates the major economic boost that looms around Uganda’s oil and gas sector. 

When oil production kicks off, there will be a likelihood of crowding out other sectors which may create big problems which need to be mitigated today by proper planning that is inclusive and forward looking. Looking at the context of the oil sector, there are four multinational oil companies with justifiable business interests that may make them reap a great percentage of the profits realised from the oil resource. 

This leaves the remaining part of the pie to the indigenous people who might be structurally constrained on employment grounds. To break down the strata, many jobs in the oil sector are masculine and therefore inclined to men.  Where does this leave the women and children? If many of the jobs are of skilled nature, how many Ugandans have been trained and how can the existing gaps be filled.

The government has done its best to put in place policy and legal regimes that promote local content, inclusion, regulates the oil and gas sector but we need to check if the same has been done for other sectors like the mining sector for diversification efforts? The government together with the other sector players like civil society and companies need to continue asking themselves these and more questions otherwise the writing on the wall remains clear.

Opinion by Jimmy Muhangi, a Programme Officer at Global Rights Alert

This article was published in the New Vision on Tuesday, May 25, 2021