By Patrick Edema
The government of Uganda has invested a huge amount of money in the oil and gas sector before oil production commences in the country.
An estimated $3.5 billion was invested in the sector during the first exploration phase and more investments are being made to explore for oil in the Kanywataba oil well in South Western Uganda and Ngassa which is found near Lake Albert.
In addition, it is expected that up to $20 billion will be injected in Uganda’s oil and gas sector during the development phase before oil production commences.
This money, which will largely be borrowed by the Ugandan government and international oil companies, will be used to finance the construction of an oil refinery, the East African Crude Oil Pipeline (EACOP), the finished petroleum products pipeline, roads, an international airport, airstrips and other infrastructure needed to commercialize Uganda’s oil and gas.
With countries increasingly prioritizing the use of clean renewable energy over oil and gas, is it not financially viable for Uganda to invest a sum of money $20 billion that is only $9 billion of Uganda’s GDP of $29 billion?
It is also important to note that Uganda’s 6.5 billion oil and gas resources are located in the eco-sensitive Albertine Rift. The rift is an important biodiversity hot spot that is a habitat for over half (51%) of Africa’s bird species, 39% of Africa’s mammal species, and 19% of Africa’s amphibian species.
The rift is also home to 70% of Uganda’s major protected areas including seven out of ten national parks, eight out of 15 forests, 12 wildlife reserves, 13 wildlife sanctuaries and five wildlife community areas.
The above environmental resources and the biodiversity therein support Uganda’s $1.6 billion tourism industry, $2.005 billion agricultural sector and the $171 million fisheries sector among others (2018 and 2019 figures). The resources also provide employment to over 5.3 million Ugandans in the various sectors.
Furthermore, the resources and biodiversity also have cultural, recreational and other values that communities and Ugandans attach importance to.
Because of the location of Uganda’s oil and gas resources, the above sectors or industries stand to be disrupted as has been seen in oil producing countries such as DR Congo, Ecuador and Nigeria where fisheries and agriculture were destroyed due to oil spills to the environment and water sources.
The oil and gas sector in Uganda risks billion- and million-dollar industries in agriculture and fisheries and at the same time threatening employment opportunities of over 5.3 million Ugandans. This, therefore, poses a question as to whether it is viable for Uganda to exploit oil especially in eco-sensitive areas especially at a time when countries that are expected to consume Uganda’s oil and gas resources are transitioning to use of clean energy.
It is moreover estimated that Uganda’s oil and gas sector will only create just over 16,000 direct and indirect job opportunities and will earn the country $2 billion in annual revenues per year. It is not prudent to invest in the oil and gas sector when countries are aggressively planning to reduce the consumption of oil and gas among other dirty energy options.
It is therefore no doubt that the energy transition efforts that are going on worldwide will have an impact on the viability of and job prospects in Uganda’s oil and gas sector. The profitability and job opportunities will reduce.
Government’s investment in the oil and gas sector at a time when an energy transition is ongoing and even the European oil and gas majors are reducing investment in the sector will also mean that Uganda will be stuck with infrastructure that provides less value than the investment made in the infrastructure.
Ugandans could also be forced to continue depending on oil and gas, which has grave negative impacts on the environment, climate change efforts, health and human rights.
Therefore, for the country to prevent a resource curse, the government needs to rethink investment in the oil and gas sector and promote clean renewable energy particularly wind and solar power.
Environmental Engineer at Africa Institute for Energy Governance (AFIEGO)
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