Ugandan irony

The offer for sale of the 40,000 bl of crude produced in Uganda during appraisal well testing represents a landmark for the nascent crude-producing nation. The country has been the coming thing in African oil for longer than it might care to recall, so having something to show for a decade of striving is something for Kampala to cheer about.

The discovery, nearly 10 years ago, of around 2.5bn bl of crude in the remote Lake Albert basin, near the border with Democratic Republic of Congo (DRC) and more than 1,000km from the sea, has been beset by delays, controversy, violence and lawsuits.

First, a prolonged tax dispute stalled UK-listed explorer Tullow Oil’s move to bring in the experience and clout of Total and China’s state-owned CNOOC. Long delays to a definitive oil law also set timetables askew.

All the while rebels of the Allied Democratic Forces opposed to the Ugandan government have made sporadic, violent raids into Uganda’s oil region from DRC, and Uganda has also had to tackle the Lord’s Resistance Army.

Since resolution of the non-military issues, final development of the Lake Albert riches has been mired in red-tape and disagreements. The three oil companies spent two years trying to reach common ground with Kampala over how much crude could be exported, and how much should remain. The government pushed for a 180,000 b/d refinery, to supply domestic and regional markets. What it eventually agreed to was a 60,000 b/d refinery to be built in two phases, after the oil companies warned that having a major crude export pipeline to the Kenyan coast was non-negotiable.

The upshot is that while production licences are still yet to be awarded, contract negotiations for the refinery construction have now begun. Going against the international grain somewhat, Uganda has plumped for Russian state-owned engineering firm Rostec as its first choice. This is a company that, along with high-tech machinery, also controls Kalashnikov, maker of probably the world’s most popular automatic weapon and a big favourite among the myriad rebel groups of sub-Saharan Africa.

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