Delay in oil exploration is welcome

WAY TO GO: Men at work at Exploration Area 3A near Lake Albert where Heritage drilled the King Fisher well in Hoima By Paul Busharizi LAST week, our very own locally-produced soap opera, went into an ad break. The show, which trickled into our collective conscience as a rumour at the beginning of the last decade of oil finds in western Uganda, steadily gathered momentum three to five years ago as front page headlines of oil finds literally rained on us, this was proof of billions of barrels of oil under our very feet. We were rich! But the plot begun to falter last year when oil explorer Heritage opted to sell their interests in the oil fields after all, they are an exploration company and their job had been done. Hollywood could not have conjured the cast of characters – bickering government officials, Italians dressed to the nines offering a deal we could not resist, a motley crew of journalists dizzy from being bounced off one side or the other and a hodge podge of do-gooders; MPs, environmentalists, NGOs all also trying to muscle in on the action. Tullow made a last ditch offer and paid $1.5b for Heritage’s stake in the oil fields to snatch it from Italian firm ENI. This Kinauganda production would have ended there – and we would have all bumped off (potholes) into the sunset were it not for the small little issue of $404m in taxes Uganda felt was due from the transaction. But wait a minute! Heritage who were liable to pay tax had already fled, “Having offloaded its stakes in the Lake Albert fields, Heritage declared it would not be paying $404m capital gains tax due on the deal. (Heritage CEO Tony) Buckingham… cleared his men out of Uganda with military precision,” the Financial Times wrote this week, leaving Uganda empty handed and Tullow holding the bag. Like a slighted lover Uganda lashed back repossessing the most lucrative oil fields from Tullow and hinting that since she did not recognise the transaction between Heritage and Tullow even one other oil field’s fate was up in the air. That is the current state of play. Oil was supposed to be gushing out of our wells and its proceeds sealing our potholes, furnishing our primary schools and stocking our hospitals in 2009. In hindsight, we see that Uganda was truly out of its depth and the current impasse, which has put pause to progress is blessing in disguise. Maybe now we can take a step back and re-examine ourselves – what do we want to achieve and how do we want to achieve that, set up the necessary conditions before we can jump back into the fray. Of course, people in the know argue that Uganda has a very progressive oil policy (which somehow did not work as seen above) and that we will not know how ready we are until oil production begins. The suggestion being that we should jump into the pool and find out whether we can swim once inside. Abraham Lincoln once said that if he was given eight hours to fell a tree he would spend the first seven hours sharpening the axe. Uganda should do likewise. The risk that we can go the way of Nigeria, Equatorial Guinea or any number of countries that have squandered their natural resource in a blaze of corruption, consumption and white elephants is a very real one for Uganda regardless of what our government says. To begin with, let’s look at how much money will accrue to Ugandans, as it stands now taxes and a few shillings on the side seem to be all. But that need not be the case. In the Middle East and Asia, governments negotiate a stake in the oil producing companies so that beyond taxes they can also benefit from retaining a share of the profits. At a later stage, these same stakes can be floated on the Uganda Securities Exchange so regular Ugandans benefit too from the spoils of the land. The Government’s insistence that a refinery should be built in the country is a laudable one, and one that should be supported by all of us. Refining our own oil rather than export crude oil can spawn beyond the oil refining, fertiliser, pharmaceutical and other petro-chemical industries. The feasibility of this endeavour is still under review but commonsense dictates that we extract maximum benefit from our own resources. But because even our billions of barrels will run out sooner than later, that’s why we need to plan assiduously for this resource. The lull in excitement, until the next episode, is time we badly need to prepare.