Recent Major Oil Discovery could Encourage Corruption in Uganda

August 19, 2010

With the recent discovery of large oil reserves in Uganda, the east African nation could see an unprecedented amount of prosperity in a country where more than a third of the population lives in poverty.

The recently-discovered reserves contain a proven amount of two billion barrels of oil.  That volume could put Uganda on the map as a major oil exporter, and will certainly attract large investments from foreign companies.

The largest international corporation to invest in Uganda’s oil reserves is the British-Irish firm, Tullow Oil.  Tullow Oil has already committed to investing hundreds of millions of dollars by signing contracts with Uganda to develop its oil reserves.  Tullow Oil estimates that oil production could commence by the end of 2011.

With a potential $2 billion a year in oil sales, that would double the current total revenue for the entire country of Uganda.

It has been known since the 1930’s that Uganda contained oil, but it wasn’t until recently that Tullow Oil and other companies discovered major reserves in the Albertine basin along the border of the Democratic Republic of Congo.

Although Uganda’s economy has doubled in the last 10 years due to renewed efforts in development, the recently-discovered oil reserves could be a major change in their financial status as a nation.  However, there is much concern that the details of the oil agreements will not be disclosed.

Political corruption is widespread throughout Uganda. Recently the European Union suspended financial aid due to the government’s slow response in fighting corruption.

Angelo Izama, an investigative reporter with the Daily Monitor, has gone to court in an effort to force the government to make its production-sharing agreements with the oil companies of public record.

Platform, a UK-based industry watchdog group, recently acquired some production-sharing contracts which it said “place profits before people.”  In response to knowledge acquired through evaluation of the contracts, Platform is calling for more protection of the environment, greater accountability of the military forces that protect the oil installations, and an improved distribution of the revenues.

The watchdog group also concluded that, due to graft, the government will receive far less than the expected 80% of revenue.  They also feel that the lack of disclosing the details in the negotiated contracts will encourage corruption.  The Uganda government defiantly rejects that assumption.

In other nations of Africa, often due to government corruption, oil development has not significantly helped their citizens.  Nigeria has acquired billions of dollars in oil revenue, yet the government has yet to use any of those profits to develop infrastructure and services within the nation.

The government of Uganda, on the other hand, adamantly states that they won’t make the same poor decisions with their oil revenues.  Ugandan President Yoweri Museveni insists on using the increased money flow to develop their own refinery, in an effort to make the country energy-independent.