WHOSE OIL: THE UGANDA-TOTAL DEAL.

What we know so far is that France’s Total E&P owns lions share – 72% shareholding in the East African Crude Oil Pipeline, Uganda’s UNOC has just 15%, China’s CNOOC is in third position with 8% while Tanzania Petroleum Development Corporation (TPDC) shares are 5%.

By Katabarwa Ronald.

Uganda discovered her first oil reserves in Western Uganda- the Albertine region in 2006. It has taken Uganda another fifteen years to sign the first extraction pact with Total, a French Multinational Company, Chinese Offshore Company (CNOOC) and the Tanzanian Government in April, 2021.

President Museveni explained the delay as a strategic move to train the necessary man power to deal with the sophisticated Oil Industry, weigh options for refinery or shipment of Crude Oil and outsourcing potential Foreign Direct Investors to help in the development of the Oil Industry in Uganda. In the years that proceeded 2016, the Ugandan Government appeared ready to begin taking the hard decisions of; which foreign companies to contract and penning down contracts with the Companies in the development of the Oil Sector. Two Companies finally won the contracts to partner with the Ugandan Government in the development of Industry.

Total, a French Multinational Company was awarded a contract to operate the Tilenga Upstream and the China National Offshore Company (CNOOC) awarded to operate the King Fisher Upstream project. The East African Crude Oil Pipeline project is expected to cost $3.5 Billion covering about 14,000 Kilometers running from Hoima in Western Uganda to Tanga in Tanzania.

The Pipeline is expected to carry 230,000 barrels of Oil per day of the 1.4 Billion barrels already discovered and accessible in the Albertine Region. The Oil is expected to last between 25-30 years. President Museveni, Tanzanian President Samia Suluhu Hassan, Total Chairman and President Patrick Pouyanne and CNOOC Chairman were in Uganda to sign the Tripartite Agreement on the East African Crude Oil Pipeline (EACOP) which was signed on 11th April, 2021. Ugandan officials described the signing a momentous occasion which is expected to mark the launch of the Ugandan oil project and get the black gold out of the ground after stalling for years.

Uganda since the discovery, facilitated and sponsored its best human resource to pursue Courses in Petroleum Engineering and Petroleum laws in the best Universities of the World. Sunmaker Uganda Ltd, a Chinese Company trained Ugandans with Coded Welding Skills in 2019 in preparation for the Construction of the East African Crude Oil Pipeline which will require over 15,000 welders when Construction finally begins.

Information regarding the East African Crude Oil Pipeline deal remains scanty to the public and confidential to those that signed the deal. A freelance Lawyer, Male Mabirizi indicated that he will be running to Court if the details of the deal are not made public.

A Total petrol station in Kampala Uganda. Photographer: Yasuyoshi Chiba/AFP/Getty Images

However, what we know so far is that French Total E&P owns lions share at 72% shareholding in the East African Crude Oil Pipeline, Uganda’s UNOC has just 15%, China’s CNOOC is in third position with 8% while Tanzania’s Tanzania Petroleum Development Corporation (TPDC) shares is 5%.

Before the details concerning the deal are made public, the deal approached from the surface looks poorly negotiated especially on the case of the Ugandan Government. The Oil reserves reside in Uganda, they are on government of Uganda land, the refinery will be stationed in Uganda and the Shareholding as it stands, the Ugandan Government will still invest Billions in the project to develop and Construction of the Pipeline. There is no clear explanation for the Shareholding arrangement as it stands, maybe there is!

This comes at a time where 250 Companies (Local and International) addressed major Banks in the world to refrain from financing the project, extensively documenting the risks including “impacts to local people through displacement, biodiversity and carbon emission.” We must be reminded that these are the same banks that Government of Uganda runs to in trying to secure loans that facilitate the development of essential projects like the Oil Pipeline project.

The Ugandan Government argues that this is the best deal that you can ever find in the Oil Sector, but how good is the deal? The Multinational Companies own 72% of the reserves and therefore cannot be looked at as Charity Organizations being benevolent actors in Uganda’s Oil Industry. They are only here for business and if any deal doesn’t make business sense to them, they will not venture in the project. It is therefore important to note that Uganda’s interests can only be guaranteed by a proper, sufficient and transparent trade deal with the Multinationals. It must have been the win-win situation for both the State of Uganda and the Multinational Companies, but is it?

The interests of Total and CNOOC even go beyond business, they also advance the interests of the Nationals they come from. France will be visible more and more in Africa and Uganda in particular because of the Uganda-Total deal that was signed recently. China which is already visible in Africa, will be in bed with Uganda even more because of the new investment CNOOC has thrown in Uganda’s Oil Sector. At least now we know who owns the 72% of the Oil, we know who owns the 15% of the Ugandan Oil, what we however don’t know is what percentage of oil is owned by the people in the Albertine Region. For example, 10% of the Tourism revenue from the National Parks is given back to the neighbors of the National Parks and the intention is for the locals to feel the need to keep these parks secure and safe. How much is being given back to the people who are “custodians” of the oil reserves- the people in the Albertine Region? So, who benefits most from this Oil? Who then owns the Oil? These and these many other questions remain unanswered.

The very many challenges notwithstanding, the Oil deal signed presents a number of opportunities to the Ugandan Citizens. Total and CNOOC for example are required as a matter of the terms of the pact to award 30% of the Contracts to suppliers of Ugandan origin. And this is where the magic answer to our pertinent Question (whose oil?) can be answered. This Oil can only be Ugandan Oil if the Ugandan Citizens prepare themselves to win these Contracts from the Multinational Companies and benefit from the drops of their own oil.

Katabarwa Ronald is a Research Fellow at Development Watch Centre.

 

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