Last December I penned an article in the New Vision newspaper warning that Uganda's oil revenue was very limited and/or virtually depleted even before extraction which is now reportedly scheduled for the year 2020. The calculation I made was based on a barrel of oil trading at $50 dollars. (Find the article in the link below) The crude oil price as of yesterday July 24, 2017 was $46.29 per barrel. This downward trend means Uganda is at a high risk of making a net loss from its oil production. The country could only break even and make some minimal profit if oil prices are at $50 or above. In his speech on January 26th 2016, Mr. Yoweri Museveni explained that: "When oil comes out, this begging will stop. We shall have our own totally independent financial base. Even when oil price is down at $50 per barrel, we shall have an additional $2.5b new money. And when oil prices improve, we shall have at least $4b." The reason I do not share Museveni's optimism is because not only the price of oil is already lower than the $50 dollars per barrel he was talking about, but more importantly he is excited about sums that do not even reach half the annual national budget of Uganda which for 2017/2018 stands at around $9b US Dollars only. So is the entire nation putting its hopes for the future on between $2.5 to $4b dollars yet the government spends $9b for its entire expenditure for just one financial year? Someone is failing to see the bigger picture here. Uganda won't get the big financial boost that many are expecting. And the reasons for this are two-fold: - The unreliable trend of oil prices, - And the fact that Uganda's production costs per barrel are too high. The production costs are too high because the oil reserves quantities are too limited. Only a billion barrels of extractable oil in total. Saudi Arabia for example extracts those billion barrels every 100 days. Ugandan oil and it's prospects are therefore largely over-rated in the country's common psyche. That is why we already have to start looking beyond oil. If up to 70% of the total oil revenues go to production companies, that means the lion's share of oil revenues will remain abroad, most likely in offshore accounts. The production companies and their agents did the maths even before hitting the ground, and are probably already pocketing their share through complicated financial products in Wall Street, New York for example, or other global Stock Exchanges and Financial institutions. It is therefore imperative to start looking beyond oil for the country's further development. That is where my research has been focused in the last six months. Waking up from the continued false excitement, and starting to think of other bold, and more proficient avenues and strategies for development. How do we kick start a real organic economic revolution? One that does not depend on the oil. While we can utilize oil resources for infrastructure develoment (roads, water, electricity and telecommunications) the country requires more long term economic solutions beyond the oil industry. Uganda needs new, modern, global and challenging economic perspectives.
By Hussein Lumumba Amin 25/07/2017 The article "Why Amin Did Not Exploit Uganda's Oil" also here: ugandansatheart.blogspot.com/2016/12/uah-why-amin-didnt-expl oit-ugandas-oil.html?m=1)
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