IOC profit presides over national development in Uganda

Uganda & Its Oil

The exploration and imminent oil production in western Uganda is likely to lead to greater company profits than national development, according to a new report by UK newspaper The Guardian.

The Katine project is being promoted by both the Ugandan government and the oil companies as one that will bring huge benefits to both, and the African nation have been led to believe they can soon consider the difficulties of agricultural reform, social unrest and political corruption things of the past. The Katine project will turn Uganda into a middle-income nation with $2 billion a year being pumped into their economy from oil.

But this may turn out to be far from the truth.

Programme designed for profit, not development

Taimour Lay of The Guardian newspaper believes that oil will only serve to exacerbate Uganda's economic and social problems. Much of the trouble within Africa stems from people, or even entire nations, wanting something their neighbour has.

But even before the Ugandan people see any of the money generated from the oil project, there are problems.

Last month, the campaigning group PLATFORM published three of the production sharing agreements (PSAs) the government has spent years keeping a closely guarded secret. The product deals point towards a resource extraction programme designed for profit, not development, and contain a series of provisions that undermine any hope of changing course.

Delivering poverty and social unrest

In short, the oil companies involved, Tullow Oil and Heritage, are set to make 35 percent on their capital investment in Lake Albert - three times what is internationally recognised as a fair profit.

The way they've done this is by guaranteeing themselves against market slumps through putting almost all of the price risk on the state. Under the agreement the Ugandan government are pinned down by a "stabilisation clause" that requires the Ugandan government to compensate the companies for any future change in the law that affects their profits.

Since The Guardian report Ugandan state officials have agreed that PSAs are unfair but as yet it is unclear if the terms of the deal are open for negotiation.

Oil has a reputation for delivering poverty and social unrest in Africa, and at the moment the deals that have been signed in Uganda do not suggest things there will be any different.

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