Will time save Uganda’s oil from Museveni’s clutches?
By Charles Kamya Ssentamu
President Museveni’s ambitions of lording it over Uganda’s oil sector are falling apart.
In mid-May, Josephine Wapakhabulo, his handpicked inaugural chief executive at the Uganda National Oil Company tendered her resignation over growing frustration with the way things were going astray at the state oil company – the entity that would be the primary interface with the multinationals that would pump the oil out of the ground. UNOC would also be the custodian of oil proceeds.
While things started off well when Wapakhabulo was appointed mid-2016, the situation progressively degenerated as pressure to infiltrate NRM party cadres into UNOC intensified. An accomplished global executive that has worked at such blue chip establishments as Rolls Royce, Wapakhabulo refused to become complicit in Museveni’s shenanigans. She quit, leaving the program open to Museveni scheming.
But her resignation is only the tip of the subterranean battle that is going on to save Uganda’s oil from Museveni’s insatiable greed. While he may have cowed any local opposition to his evil schemes, sources familiar with the goings on reveal that the oil companies, notably French energy giant Total E&P are putting up a last stand against Museveni.
According to knowledgeable sources, there is growing concern in western circles that oil money can only make Museveni’s impunity worse. Disruptive enough from the current meagre resources, there are fears over how oil money will swell Museveni’s megalomania with attendant consequences for regional stability.
There is also uncertainty over Uganda’s future stability given the growing political polarization and repression as the increasingly impatient young become ever more militant and more willing to stand up to the regime that has robbed the Ugandan youth of its future. Bent on creaming off the development phase, Museveni wants to saddle Ugandans with an expensive and economically inefficient refinery.
But Museveni’s plans first to team up with Russians fell through in 2015 when the owner of RT Global Resources became the subject of US sanctions. That setback was welcome by everyone that loves Uganda. And those who, in the more than a decade since the presence of oil was first confirmed, have been working hard to ensure it comes out of the ground after robust policy and legal frameworks are in place.
Despite those material conditions not being in place, Museveni continues to dominate the oil debate, and is at the center of making critical decisions that are well beyond his technical competence. More significantly, he no longer sees the oil as a national resource but rather his personal fortune. On several occasions, media have captured him speaking of “my oil”, rather than “our oil”, or “the country’s oil”.
This in itself has sent alarm bells ringing in different quarters, resulting in a stalemate that is costing Uganda time and opportunity. In comparison, Ghana, which discovered commercial quantities of oil in 2007 – a year after Uganda – was able to transition to the production stage in just three years. As a result Ghana was able to reap from the crest of high international prices for crude, which crossed the US$ 100 a barrel mark about that time. Museveni’s recalcitrance was costing Uganda dearly.
In the behind the scenes maneuvers, the oil companies have tried to dissuade Museveni from building an oil refinery – one of the main sticking points impeding production. They have tried to get him to see that there is no commercial sense in building a refinery 1500 kilometers from the nearest shoreline, based on a crude production cycle of just 25 years.
Besides the limited market for refined oil from Uganda due to the high production costs, the refinery would become a white elephant after the 25-year. That’s because Uganda would then need to import crude to feed it – something highly inconceivable. That aside, the chemical composition of Uganda’s crude, which is 30 percent paraffin wax, makes it more suitable for production of kerosene and aviation fuel.
The yields of other fuels such as gasoline and diesel would be so low that boosting them would require blending the Ugandan product with lighter crudes, which would have to be imported. Quite unlikely. The educated conclusion is that Uganda does not have the infrastructure and logistics to undertake a refinery operation at competitive cost. South Sudan, which would be the nearest source for such additive feedstock is in turmoil, thanks to an ill-advised interventionist policy by Museveni in the affairs of South Sudan.
The oil companies even offered Museveni incentives under which they would buy Uganda’s share of the crude and then import refined oils for the downstream at guaranteed low prices. But Museveni remains adamant, insisting on a refinery. Given the corrupt ways of Museveni and his family, it is not difficult to see that under Uganda’s opaque system, refinery operations would give him leeway to spend oil money as he chooses, without much scrutiny.
As a result prospective investors in the commercialization of Uganda’s oil, now confirmed at 1.2 billion barrels of recoverable crude, have decided to adopt a wait and see attitude. Everybody is now waiting to see what happens after the 2021 presidential and parliamentary elections before they can risk their money and see it disappear in the hole of a recklessly corrupt system.
In any case, the foreign investors can see, Uganda’s contentious oil programme has already caused significant social displacement. They have seen how the Ugandan ruler’s close family members and henchmen have taken control of strategically placed land – through unscrupulous and unchecked land grabbing – along the sites for location of key oil production infrastructure.
Investors’ are betting that either the opposition gains sufficient traction to edge Museveni out in the 2021 elections, or nature takes its course in subsequent years and the man expires. The timeline for getting the crude out of the ground remains a moving target. With key decisions still way off the mark, the 2020 deadline for the first oil has become a figment of some politicians’ imagination. People familiar with the oil industry now talk of 2023, or beyond as the more likely date for the so far highly illusive first oil.
Also a final investment decision for the crude exportation pipeline, first expected in April 2019 has quietly slipped into the indefinite future as Uganda and Tanzania haggle with oil majors Total E&P and CNOOC over host agreements.
Most Ugandans have watched as yet another national resource remains unexploited thanks to the incompetence, greed and folly of their 33-year ruler.