The Ugandan government had earlier announced 2020 as its first oil production deadline. However, Matia Kasaija, the Minister of Finance, Planning and Economic Development says that Government is clueless on when Uganda will see her first oil.
Kasaija made the remarks while addressing guests that had gathered at Kampala Serena Hotel during the Wednesday Economic Summit organized by NTV.
“Ladies and gentlemen, poverty is terrible. Poverty is bad. If we were not poor, we would have had our oil out of the ground 3 or 4 years ago. Now we don’t know when we shall have it (out of ground),” Kasaija said.
Kasaija’s remarks come at a time when President Yoweri Museveni is expected to chair a meeting between top Government officials and the three main oil firms, Total E&P, Cnooc, and Tullow Oil, to break the ongoing deadlock between the oil giants and Uganda on 12th December 2018.
It is understood that the three oil companies want the holding company for the crude oil export pipeline incorporated in the UK, a proposal that is contested by Uganda that is seeking to have the company incorporated within Uganda, with Government officials warning that if Uganda agrees to the proposal, the East African country risks losing tax revenue.
Another point of contention between Uganda and the oil companies is the fear by Government to have the National Oil Company’s participating interest maintained at 15%, with experts in the sector arguing that this percentage isn’t enough to swing decisions when the shareholders of the pipeline company vote on key issues.
Government argues that since it owns the oil resources, there is need for Uganda to have more voting rights, something the oil firms are opposed to.
On the other hand, the oil companies are demanding for full rights over any land where the crude oil pipeline will pass, a proposal that has yet again been rejected by Uganda.
Government insists it will only endorse rights that facilitate co-existence with other infrastructure such as roads and power lines.
In case of any disputes, the oil companies want the arbitration to take place at the ICSID court in Washington, USA, a move that is being protested by Government asserting that the ICSID court in Washington is unfair to states, and instead prefers the London Court of Arbitration.
However, should the two parties fail to agree on the terms of engagement, and the oil companies decide to terminate their contracts, Uganda will have to cough out trillions of shillings to the oil companies.
First, tax payers will part with USD2.5bn (about Shs9.3trillion) for investments made in the oil fields to date, and part with another USD138Million (about Shs514.5bn) investments in the crude oil pipeline to date.
As much as Government had wished the oil companies could recover all their costs for putting up the pipeline in over 25 years, the companies want to have their money recovered within just 10 years.
Additionally, Total E&P, CNOOC and Tullow Oil want Uganda’s Government to channel all the available oil resources towards the export pipeline to Tanzania’s Tanga port and the trio want Uganda to forget about putting up a refinery until at least the year 2026.
Should decline to agree to this request, and sticks to building the oil refinery, the three oil firms say the tariff they will charge Government for exporting the crude through the pipeline will be more than $16 per barrel, higher than the $12.2 per barrel agreed earlier.
