Big oil: boom or bust for Uganda?

Uganda's economic prospects are changing because of an area of the Western Rift Valley, along the Nile River. That's where you'll find Lake Albert and Murchison Falls, along with national parks teeming with wildlife. But this area will change Uganda's future because of what's under the ground.

"It is there that God put oil," says local businessman Elly Karuhanga.

Tests indicate that there is a lot of oil, adds Karuhanga, who heads up the Uganda branch of the British-based oil company, Tullow.

During exploration, test drills typically strike oil maybe a quarter of the time. Karuhanga says in Uganda, it has happened nine out of every ten times.

“Wherever you sink you find oil," he says with a laugh. "There is oil everywhere."

Experts believe there could be enough oil in Uganda to make the country one of Africa's biggest producers -- enough oil to help pay for a lot of needed infrastructure.

The discovery has stoked a kind of oil fever, according to Peter Mwesige, Executive Director of the African Center for Media Excellence in the capital, Kampala.

“In some ways you could call it real madness," he says. “There is a lot of excitement and drama around oil. People think the government is going to become a middle income country in just two or three years."

Three companies have contracts to extract the oil. Tullow, the Chinese National Offshore Oil Company, and France’s Total. But the deals have been kept under wraps.

The government’s secrecy has bred skepticism. Mwesige says that’s why his group is training journalists to cover the nascent oil industry.

“Very few people know what is really going on in oil," says Mwesige. "There is an information gap that has led to all sorts of accusations and allegations of corruption and bribery being thrown around -- some true, some quite ridiculous."

Uganda will make sure that it doesn’t get ripped off by the foreign oil companies, insists Peter Lokeris, the country's minister of energy and minerals.

“We are doing our legal obligation to get money for the country because you cannot have a resource where the country gets nothing," Lokeris says. "If you are not serious, you will be exploited."

Ugandans may learn more about the oil deals because of a U.S. law: the Dodd-Frank Act. It requires companies that trade on the U.S. stock exchange to disclose the terms of their deals with foreign governments. Total and the Chinese National Offshore Oil Company both trade on Wall Street.

Ugandans are also worried that the oil industry will damage the environment. Tullow’s Elly Karuhanga says the government and the industry are well aware of those concerns.

“So the oil companies are very, very careful," says Karuhanga. "Everybody is being careful to mix conservation with development and development with conservation."

Uganda is butting heads with the oil companies on another front, even before pumping has begun. The government wants to build a big refinery to turn some of the crude into gas for Uganda and the region. The oil companies say a refinery can wait; they’re pushing to build a pipeline right away to ship most of the oil out of Uganda to overseas markets. How this dispute gets resolved may say a lot about how well Uganda will manage the challenges of its oil boom.

Shirley Jahad was awarded a fellowship from the International Center for Journalists, the Ford Foundation and the Brooks and Joan Fortune Family Foundation for coverage of this story.

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