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Why Amin did not exploit Uganda’s oil

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This was written by Hussein Lumumba Amin and it was shared on Social Media on December 19, 2016 by Hussein and I published it on the Nangalama Blog. Ugandans should read the Oil reports published on this site every Tuesday and Friday.  You will see why President Idi Amin hesitated and you will understand why President Yoweri Museveni is fooling you all that Uganda’s wealth will come from oil.

Conflict of interest declaration.  Martha Leah Nangalama is affiliated with 2 oil companies.


The Upcoming Rude Awakening

We need to understand the reality regarding Uganda’s oil. This has to be done as simply as possible for all Ugandans to understand.

The country’s oil reserves are estimated at 5 billion barrels. And from that, only 1 billion barrels are extractable.

As of Friday, December 16, 2016, the Crude Oil Price was at $51 .90 per barrel. So if today we sold all the 1 billion barrels of extractable oil, we would get $51 billion US Dollars.

Saudi Arabia for example, earned $200 billion dollars from oil in 2015. This means that Uganda’s entire oil reserves revenue is only a quarter of what the Saudi’s make from their oil in just one year.

And while the total oil revenue might be a huge amount to an individual, it is only equivalent to five years of our own national budget which stands at almost $10 billion USD for the 2016/2017 financial year.

Meaning that after only five to six years, that would be it forever in regards to all the revenue from the product.

Remember that the oil production agreements give the oil companies around 20% of that total revenue as well. That amounts to $10 billion USD that goes to them.

Last August, the Energy ministry announced that “the oil companies will invest around $10 billion USD to undertake the drilling of about 500 wells and construction of associated infrastructure, before the country can see first commercial production by 2020.” That is another $10 billion USD that the companies will recoup as agreed in the oil production contract even before Uganda gets its share of the revenue.

At the same time, we are going to spend $5 billion USD in building the Uganda-Tanzania pipeline, and another $5 billion to build a major refinery.

If we make a simple calculation of the above amounts, we have $30 billion dollars already gone from the $51 billion total.

Further more, I estimate that probably another ten billion dollars are already spent in advance expenditure like the relocation/compensation of populations, plus fighter jets, and other untold public debt where every other month our parliament is approving loans in the hundreds of millions of dollars each.

These loans are based on the premise that we will soon have oil to repay them plus any accrued interest.

Lastly, according to Global Witness, some of the environmental hazards that come with oil exploration activities include destruction of animal habitats, water contamination, generation of waste; air pollution as a result of flaring of crude oil; and danger to wildlife. The benefits will therefore also go to protecting the surrounding populations and the environment.

Remember that land compensation features as part of the oil production costs. The refinery alone requires more than 29sq km of community land from 13 villages. The acquisition affects 1,221 households with a total population of 7,118 people.

Moving these families required appropriate compensation and relocation into newly built housing. If we add the road networks leading to and from the oil wells plus another pipeline from the refinery to Kampala, the cost is approximately another billion dollars. This leaves us with barely any profits from the $51 billion USD total oil revenue.

That sum is based on the assumption that the price per barrel doesn’t collapse again as it did early this year when it reached $30 per barrel. At that rate, we would be producing oil at a total loss and would already now be owing the production companies money instead. In any case, when we hear people saying that revenue from oil has already been depleted even before the product came out of the ground, this calculation clearly exposes the sad reality.

People wonder why didn’t President Idi Amin exploit Uganda’s oil? In the 1970’s, the average price per barrel was even lower than todays rate, an average $12 dollars a barrel between 1973 and 1979. Therefore oil production would have been an even bigger loss for Uganda. His final decision was that it was better we left the oil where it was.

At this point we are better off forgeting the pipeline (It will soon become obsolete anyway) and focus on the refinery. At least we will save $5 billion US dollars, and simultaneously produce added value oil products like petrol, diesel and kerosene for the local/regional market.

This assessment explains how the entire meagre revenues from the raw resource have already gone to other entities other than the Ugandan people.

Hussein Lumumba Amin

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