Ugandan and Kenyan politicians electrified by profit expectations
(chr) One doesn’t expect that: A road meeting German standards in Uganda. Expected bubbly revenue from the oil resources under Lake Albert make it possible - and eager Chinese companies make it a reality, as so often in East Africa these days. The modern road from the ancient colonial town of Fort Portal to Bundibugyo on the border to the Democratic Republic of Congo, which was afflicted by refugee flows and an Ebola fever epidemic in 2007, is a good example of Far Eastern workmanship. African workers are grinding the winding road into the northwestern edge of the Ruwenzori massif under the watchful eyes of Chinese engineers. This road leads to the three-lane highway A 109 to Kampala, 320 km away. Of course the companies from China are not building these roads for altruistic reasons. They are needed to transport the black gold very fast on big trucks to Kampala. From there, a 352 km long oil pipeline is planned to Eldoret in Kenya. At the moment 14 international firms and consortia are said to be competing for the 300 million dollars plus contract. From there, the oil could be brought to Mombasa port. Moreover, a new port project, called Lamu, with a 1.300 km long oil pipeline and a 1720 km long rail link is in the political discussion. Whether Kenya will be able to shoulder the estimated total costs of 29 billion dollars is another question.
Anyway, experts estimate that Uganda has 3.5 bn tons of oil. Giraffe 1 and buffalo-giraffe are the names of the giant oil fields underneath Lake Albert. The first oil could probably be produced in 2017. If this comes true, Uganda could rise up to one of the most powerful actors in the African oil market and world-wide. In light of the huge discoveries, great optimists are reportedly talking about “Saudi Arabian dimensions.” The companies Total from France, Tullow Oil from Canada and CNOOC from China are already competing by all means for an exploitation licence. Tullow Oil, which is listed in the London Stock Exchange and with a market share of 49 % and discoverer of the huge Jubilee oil field off the coast of Ghana the market leader for oil exploration in West Africa, is the biggest player in the game. According to reports of the British newspaper “The Telegraph” in March 2013, the company is accused of having spent 100 million dollars on bribes. The original schedule to exploit the oil in 2010 has been revised again and again. On top of all that, there was a big scandal in the Ugandan parliament at the end of 2011, after Wikileaks published the secret negotiation protocols of the deal. Interior Minister Hillary Onek had to resign as a result of this affair.
Now oil exploitation is a matter for the boss. Uganda’s President Yoweri Museveni has lost his patience with the faltering oil development process. "Uganda discovered oil in 2006, but has not been able to start the extraction process owing to a battle our country has with oil companies. Some of them have the usual stereotype impression about Africa and unable to understand our needs, let alone develop our resources in a correct manner," Museveni ranted recently in front of the press. Some months ago the long-standing Ugandan head of state signed the new Petroleum (Exploration, Development and Production) Act 2013, which was gazetted on 5 April 2013. The new Act automatically repeals the Ugandan Petroleum (Exploration and Production) Act, CAP 150, which was enacted in 1985.
With the expected revenue from the oil sales, Museveni is planning an enormous 200-billion-investment programme for his country: Huge irrigation projects, the establishment of a phosphate and iron ore industry, ten new towns with international airports, a functioning education system, one nuclear and several hydropower plants and science and technology centres in all major cities. Some parts of this plan are surely castles in the air, but some will be implemented with help from the Chinese. The African “Business Week Journal” reported recently that the countries of the East African Union will invest twelve million dollars in infrastructure projects over the coming next five years. The most important projects next year will be the 51 km long Entebbe Express Highway and the asphalting of 90 km long street from Moroto to Nakapiripirti in the Karamoja Region. As a consequence of the construction boom, the general purchasing power will increase. The pockets of the achievers in the oil sector are already filled. The ailing construction industry will certainly get a push.
Chinese companies with their concept of “contractor negotiated loans” are often ahead of their competitors in the pull of lucrative contracts. “Contractor negotiated loan” means that the Chinese contractor promises to provide project finance as well. Other countries have not yet found a way, to beat their Asian competitors with their market strategy. So they can only react with bitterness and polemics, calling this way of making business a modern form of colonialism, but they fail to understand that African leaders today make business only with economically most favourable partner.