Uganda has enough oil reserves to transform its economy. But low oil prices and difficult negotiations have kept the landlocked country's resource boom on hold.
When commercially viable deposits of oil were first discovered in Uganda's Albertine Graben in 2006, it was hoped that production could begin as soon as 2009. But now, nine years since the find, there is still no certainty of when the oil will start flowing.
Uganda's proven reserves of oil stand at around 2.5bn barrels, half of which the government estimates are recoverable. This would be sufficient to turn Uganda into a mid-tier African producer by the middle of the next decade with potentially transformative effects on the national economy. However, long-running disputes between upstream companies and the government over taxes and exports mean production remains some way off.
Officially, the government is optimistic that production can begin at its flagship Kingfisher field by 2018. However, the fall in world oil prices has left many independent observers doubtful that the necessary capital can be raised to bring oil online in this timeframe.
In its monetary policy report for April, the Bank of Uganda warns, "The global oil price outlook places severe question marks over the speed with which Uganda's oil resources can now be developed, especially given that the country's proven oil reserves are waxy, which increases the cost of moving them to the coast."
It continues: "Whereas oil production had been projected to start in 2018, this date could now be pushed out even further, given that the profitability of oil investments could remain depressed in the foreseeable future."
Oil prices, however, are not the only factor to have delayed production in Uganda. Of the three upstream companies operating in the country--China National Offshore Oil Corporation (CNOOC), France's Total and the UK's Tullow Oil--only CNOOC has been awarded a production licence. The delay in awarding licences to Tullow and Total is thought to stem from disputes surrounding tax and how much oil will be consumed locally or exported overseas.
For several years, President Yoweri Museveni has been adamant that a refinery be built in Uganda to feed the local market. This has been resisted by the production companies who fear they could become subject to price restrictions on locally consumed fuel. The government initially demanded a refinery with capacity for 180,000 barrels per day (bpd), but after much negotiation...