Recent oil finds in the Lake Albert region could soon turn Uganda into a mid-sized oil-producing country. Estimates suggest it may be the largest onshore oilfields complex discovered in sub-Saharan Africa for the past two decades.
The revenue from oil production could prove a dramatic boost to Uganda’s ailing economy. However, there are serious concerns over the government’s ability to manage this resource responsibly and avoid the so-called “resource curse”.
Currently, Uganda has 2billion barrels of confirmed reserves in the Lake Albert region, but unconfirmed estimates reach as high as 6billion barrels.
The country expects to earn about $2billion a year from oil by 2015. This unprecedented rise in government revenue could pave the way for major improvements in Uganda’s dilapidated infrastructure and thereby spawn positive knock-on effects across the whole of the economy.
Accelerated economic growth and increased investment in health and education could lift millions out of poverty and help the country achieve its UN Millennium Development goals.
At the same time, however, Uganda’s newfound oil wealth could make the country less stable, more insecure, and exacerbate the culture of corruption which has so disfigured its economy.
One of the main concerns regarding the development of Uganda’s oil&gas resources is a deterioration in the already fragile security situation in the Great Lakes region of central Africa. In particular, Lake Albert straddles the border between Uganda and the conflict-ridden Democratic Republic of Congo (DRC) on its western shore. The two countries have a tense, and at times hostile, relationship.
The ongoing dispute over the precise demarcation of the border – a more strategic question since the discovery of oil – has heightened fears that interstate war might break out in an already militarised region of the Great Lakes.
In addition, rebel groups, such as the Lord’s Resistance Army, operate almost unchecked on the Congolese side of Lake Albert. With UN forces scheduled to pull out of DRC by the end of next year and government troops unlikely to fill the gap effectively, the area of rebel activity could expand.
Most rebel groups in the region fund themselves through mineral extraction, and often revert to banditry. Once production begins and larger numbers of workers – especially expatriates – are deployed to the region, the risk of illegal taxation, as well as kidnap for ransom, could increase.
Alongside regional security concerns, internal tensions could intensify. Uganda’s president, Yoweri Museveni, and his political allies have already been widely criticised for squandering state assets for personal gain.
In 2005, the World Bank estimated that Uganda loses more than $300million per year to corruption.
The oil finds could spur local groups to turn against Museveni, especially the Bunyoro kingdom, which has rights over much of the shores of Lake Albert.
Its demand for a 10% share of the oil wealth could fuel activism, and even militancy, in other regions of the country where Museveni faces stiff opposition. An increase in political violence and civil unrest would damage investor confidence and hinder development of the sector.
In order to avoid the “resource curse” – which has seen numerous energy-producing countries in Africa fall victim to corruption and increased poverty – it is vital to deepen and consolidate the democratisation process in Uganda. In particular, the 2011 elections need to be conducted in a free and transparent manner – and seen to be so by the Ugandan public.
It is especially vital for the government to put in place oil&gas management laws and regulations aimed at ensuring equitable distribution of oil revenues while taking into account the interests and needs of the communities in the region.
Investors should demand robust accountability and good governance on the part of Kampala to inhibit politicians’ ability to siphon off oil revenues for personal enrichment.
Oil production-sharing agreements need to be structured in a way that benefits not only foreign companies but also helps to develop and transform the country from the ground up.
Above all, in the medium to long term, the successful development of the Lake Albert oil finds (by Tullow Oil and Heritage) will be dependent on co-operation and constructive engagement between Uganda and the DRC.
The two countries need each other if they are to benefit from the oil because Uganda cannot afford instability on the lake if it is to attract the foreign investment needed to extract and export oil.
Hanna-Caroline Imig is a specialist in sub-Saharan Africa affairs at security specialist AKE Ltd