UGANDA: UGANDANS IS CARRIED AWAY WITH FALSE OIL EXPECTATION AS A NATION-ROW DEAL ON OIL
Even a kid will know they have gotten a bad deal.The oil companies and Tanzanian government take $55 dollars from the $60 dollars of each barrel,
By Mr. Hussein Lumumba Amin
Ramadhan Kareem to all Muslims, including Madame Samia Suluhu and the people of Tanzania who are at least seriously developing their country using Ugandan oil, even earning more than us on our own oil, and have already reached middle income status five years ahead of schedule. Blessings to all during this fasting season
KAMPALA-UGANDA: Looking at the oil excitement in all the headlines of all local newspapers it is clear that gullibility levels are very high in the public opinion domain, yet it is very important that we don’t get carried away with false oil expectations as a nation.
Let me get to the point: Uganda has gotten a terrible deal on its own oil, and nobody should be sugar-coating that.
This bad deal is not from what was signed yesterday but from the entire oil exploration project since the NRM government hurriedly decided to extract Uganda’s oil reserves that had first been discovered by the British in 1927.
Let’s do the simple maths in five seconds.
Today a barrel of oil costs $60 Dollars. Now the oil companies will get 70% of that which is $42. And the Tanzanian government charges $12.77 as transit tax for each barrel of oil passing on the Tanzanian potion of the pipeline.
The oil companies and Tanzanian government take $55 dollars from the $60 dollars of each barrel, leaving Uganda to take only $5 dollars from each barrel of its own oil.
Even a kid will know they have gotten a bad deal.
This alone shows that those responsible for negotiating on behalf of Uganda were either incompetent, or incompetent.
What I am reading in the papers is how some individuals just trying to get everyone excited about what they themselves are going to eat from the oil production itself.
If what I have just demonstrated so far does not register in anyone’s brain, then let me go a bit deeper in just five more seconds.
Given that Uganda’s ex-tractable oil is only a billion barrels, the $5 dollars we get per barrel translates into just $5 billion dollars that Uganda will get from all of its oil.
Therefore the people of Uganda should ask their government what do they intend to promise this country with this $5 billion dollars?
Remember that this is before we ask them how much money has the state already spent on this oil exploration project, funds that should then be deducted from this $5 billion so as to see the true meager final earnings that the state is getting from the country’s entire feeble oil reserves for its people.
Whether it’s the countless loans that Uganda has already taken against oil, or all the compensation that Uganda has had to disburse to dislodge locals for oil exploration, or even the upcoming refinery that will cost $3 billion dollars to build.
If all these exceed the $5 billion Dollars that the country is supposed to earn from all it’s oil, then there is no doubt that we have empty heads handling the country’s oil on behalf of its people.
This project is a pipe dream where it is only those directly involved in the oil project who will get anything.
All the rest, especially those who were hoping that Uganda will suddenly become a rich country and government will earn a lot of money to fund better schools and better services to the people around the country, and embark on world class infrastructure development projects around the country thanks to a great inflow of oil revenue, people are going to wake up one day and realize that the oil curse is actually brought about by comparing expectations versus reality.
Notice that they are not even talking anymore about the great public services and development projects that government will embark on for the people using oil revenue.
This is because the government of Uganda is not going to be able to do anything for the people of Uganda from their own oil.
If you are wondering why all governments since 1927, including the British colonial government and the Amin administration, knew that some oil existed in Uganda but did nothing to extract it, well it is simply because it is not worth it to embark on an activity where the cost of extracting oil and getting it to the market is equal or less than the revenue that comes from selling that oil, and therefore there is no extra revenue for government and the people of Uganda.
I suspect that the only reason a hasty decision was taken in the 90’s to go ahead with this oil extraction is because those involved were either completely ignorant of this simple business principle, or only thinking about how to line their own pockets from the oil projects, but had never really included Uganda’s strategic development as a country in their calculations except as rhetoric.
And now reality is becoming much clearer and they have started grappling about what other use to make of the pipeline, a telling sign which confirms that not only didn’t Ugandan leaders do the maths properly beforehand, they are also only now realizing that the country as a whole gets nothing from it’s own oil, and it is their initial 20 year myopia, and poor business acumen that has brought about the current predicament of false hope that they have put the whole country in.
Meanwhile Ramadhan Kareem to all Muslims, including Madame Samia Suluhu and the people of Tanzania who are at least seriously developing their country using Ugandan oil, even earning more than us on our own oil, and have already reached middle income status five years ahead of schedule. Blessings to all during this fasting season.