The Independent Uganda: You get the Truth we Pay the Price
Museveni personally, and his government generally, missed the most critical part of strategy, especially in war, which our president understands best. The first principle of command in war (as in business) is “selection and maintenance of the aim.” What is the aim of Uganda? It is to produce and sell oil. We can add many things – high revenue share, tax policy maximizing government’s take, etc. But production is the main aim without which everything else is impossible.
Yet Uganda bogged herself in endless negotiations over taxes, as if taxation was the main aim. Our windfall is in the revenue share in PSAs, where we already did excellently, not in Capital Gains Tax, or the transferability of past costs from a holder of a license to a buyer. So we focused on pennies and forgot the pounds.
In this tactical pursuit of maximizing immediate tax returns, we have undermined the realization of the main aim – oil production. We also forgot the time value of money: that the cost of delay to produce exceeds the benefits sought from the taxes we sought. And new technologies with climate concerns may make fossil fuels obsolete.
These delays have had a devastating effect on the reputation of Uganda as a destination for investment in upstream oil. There is a global standard on the average time it takes from discovery to production of oil. For offshore it is four years, onshore, it is seven years. Uganda first discovered oil in 2006: 14 years later we are 7-10years away from production.
To many international investors, the message is clear: if you invest your money in Uganda’s oil industry, it will take 20 years before you produce and begin earning. Only a masochist with an insatiable desire for losing money would seek such a country as a destination for her investment.
The taste of the pudding is in the eating. Uganda had a very high oil discovery rate. The global average is 17% of oil wells drilled have extractable oil; Uganda’s is 88%.
Yet when we auctioned oil exploration licenses last year, no one serious showed interest– including Tullow, CNOOC and Total who are already here. Only three unknown companies, two from Nigeria, showed up. The message from the market is loud: Uganda’s oil industry is not attractive for investment.
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If then no side wants to lose then nothing will happen. How about the oil simmering underneath? Why can’t the government take heed president magufulis advice. Accept some small loses and forge ahead. Half a bread is better than no bread at all. This scepticism is leading us no where, and we can’t all win at the same time.
Local investment in tourism is probably more feasible and can be a great employment generator.
There is too little for a visitor to do. How about a series of guided walking tours within convenient travel distance of Kampala, cannot rely on game parks all the time?
As for the oil, probably nothing will happen for a couple of years, then the whole project will have to be revisited and downsized, but most likely it will never be produced at all.
The URA staff panicked when they realized that everyone else was going to be able to steal the oil revenues before they could and imposed all these new taxes to collect their usual ‘bonus’.
Countries like Uganda and Nigeria are simply too risky for large scale foreign investment.
When Mr. Museveni eventually decides to start production, firewood may have more value than oil.
That was brilliant but the HE as usual failed to balance on regionally ,Our HE thinks only the pipo in the West shd take all the cake. Please read , is Obote victim or vilian
I appreciate M7 fighting for our oil,. But I agree with Mwenda that over protection while nice on paper will be our own undoing. Even western governments sometimes have to give in to corporations. The trick is to let them come in and once they are heavily invested we change the rules
YOU can be a fool or an idiot by design or by default.
YOU can have eyes and choose not to see, and have ears and choose not to hear.
WHATEVER it is that one means when they say “our oil” I am inclined to believe that they are a relative of M 7.
M7 said very clearly, and not just once, that he is NOT anyone’s servant, and that all he does is for HIMSELF and his family. IT was not a rumor or something brought up by the hapless press or the opposition.
SO when you start to imagine that whatever he is doing is to protect “our oil”, the same oil that he has called “my oil”, the same oil that is making him superglue himself on us, my best advise to you is to make a visit to BUTABIKA or some such institution.
@Ogora:You think oil business is like selling cassava?Once we begin producing oil we shall be required to sign binding agreements with other oil producing nations. Please read about OPEC,International Energy Agency,the Seven Sisters.
Oil is one of the products that can be classified as oligopoly products;this means there are few producers and they control the market price of their products.
Laws are meant for clarity; I personally think that Uganda is not in a hurry to process her oil because we simply dont click the dynamics of the oil market;There is a difference between experience and having qualifications.i want to hear of Gaffeny and Cline Associates in Uganda,
OUR bunch of rulers are just bumbling and clueless 949ots!!!!!!
I have said it countless number of times, and indeed did warn in one of my posts on this very forum that this is what would happen.
OIL companies , and indeed most multinationals, for the reason that Wiinnie has mentioned above, OLIGOPOLY, act as a CARTEL and even when they are in competition, they each protect their backs,if you mess one up , you have messed them all and you can not play one off against another.
MOST of the heads of these corporations went to the same schools, belong to the same clubs and their interests are the same, and most importantly they have VERY DEEP pockets (the corporations) and are also aware of the GREED of our rulers, in addition to knowing most if not all of their dirty secrets.
A RULER or third world country can not hold a multinational corporation, which most times has also the backing of its own country, to ransom.
WHAT they WANT, they WILL GET. (end of).
M7 can dance and do all the gymnastics he wants, at the end of the day he will pander to what the multinationals want.
THE rulers are left to make all the noise they want, especially if they want to impress their hapless citizens, but the bottom line is you DEAL or you are DOOMED.
What a curse when a country leader can accept a “gift” 🎁 presented to him by his foreign affairs minister and he doesn’t question for which good deed is it for?