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Museveni locks out oil investors


It’s Total disaster

Kampala, Uganda | HAGGAI MATSIKO | Uganda’s oil sector has been thrown into another toss up after President Yoweri Museveni cancelled a highly anticipated meeting on June 05 between him and oil production company executives; The Independent can exclusively report.

The meeting was to be a follow up of one on April 29 that went badly as the oil executives attempted to squeeze a breakthrough from Museveni but he left them empty handed and, according to highly placed sources, pushed hopes of Uganda’s first oil farther.

Museveni’s cancellation sinks any hope of early or easy resolution of disagreements. According to insiders, it shows Museveni is still seething from the outcome of the April 29 meeting.

At the meeting, the oil executives wanted Museveni to direct URA on what to do to resolve a tax dispute. But Museveni reportedly insisted the oil firms had to go and resolve the issue with URA not him. At that point, one of the oil executives reportedly bluntly told Museveni that, in that case, there would be no movement.

By no movement, the oil executive meant the company would freeze its activities in Uganda. It appears this did not go well with Museveni and the meeting reportedly ended prematurely.

At the centre of the disagreement between Museveni and the oil companies are several issues including; new regulations for midstream activities that include processing, storing, marketing, and transport the oil.

There are potentially lucrative deals in this sector, which the oil companies are anxious to retain but the government insists it must be a player. The other point of disagreement is over recoverable tax costs that the oil companies are claiming, and Capital Gains Tax (CGT) that the government wants.

Initially, the CGT dispute was over a US$167 million (Approx. Shs625 billion) bill that the Uganda Revenue Authority (URA) slapped on Tullow for its sale announced in January 2017 of US$ 900 worth of assets to Total E&P and the Chinese oil firm CNOOC. Tullow had refused any of it insisting given the costs it had incurred, the cost didn’t arise—sparking a stalemate.

But since Total and CNOOC want to move on to the next stage; the Final Investment Decision (FID) into production with even bigger money at stake, they offered to clear the US$82 million in dispute and got Tullow to offer the remaining $ 85 million.

However, they also offered tough conditions, which URA has refused to accept and it appears Museveni has now also rejected.

The June 05 was seen as an opportunity to push the past behind and move on.

Museveni instead fired off a letter to Total E&P, the oil giant leading negotiations on the side of the oil companies, indicating that he rejected all their demands and, therefore, there was no point of meeting. By presstime, it wasn’t clear how the negotiations would move forward.

President Museveni has remained overly cautious at every point in the journey towards Uganda becoming an oil producing. This could be partly because of lessons learned from elsewhere—where poor decision making around oil extraction has hurt more than developed economies. He is also surrounded by technocrats who appear keen to squeeze out the best deal for the country.

The hardball stance has strong backers; especially at the Petroleum Authority of Uganda (PAU), the Ministry of Energy, and taxman, URA.

But it frustrates oil companies which are equally looking for the best deal, and the Uganda National Oil Company (UNOC), who partly owing to their business approach, want the government to get the oil cash now and invest it in other ventures to make even more money.

Indeed, when the UNOC boss, Josephine Wapakabulo, announced early May that she would quit the job within three months, some cited frustrations surrounding delayed decision-making.

Pro-business experts warn that Uganda is also discouraging future investors with its decision gridlock. Indeed, the last time the country put up fresh oil blocks for exploration in 2016, it only attracted small and in some cases dubious companies. Some pessimists insist more exploration blocks offered last year could equally suffer.

Uganda first discovered commercially viable quantities of oil—now totaling 6.5 billion barrels with over one billion of these recoverable—in 2006 but delays in establishing the necessary laws and institutions, erecting the requisite infrastructure, disagreement over route to production, and major tax wrangles have delayed the start of production for 13 years now.

The government’s failure to resolve disputes quickly delays the FID by oil companies. This in turn delays everything else—the oil pipeline through Tanzania, the refinery, and all the critical works on the oil fields.

Last year, the hope was that the investors would reach FID in the first quarter of this year. But going by what is happening, it will take a miracle to reach FID this year. That is why Museveni’s cancelling this crucial meeting is a major setback. 


  1. Paul Kilimi Wanda

    It is said oil discovery is a curse. The reason is that business sharks want to steal oil proceedsand leave the country poorer than before. His Excellency is right though it shouldn’t take a lot of time to begine the production.

  2. We need to get going.
    In any negotiation, you can’t have it all. Lose some win some and create the win win situation. There is a bigger gain when activity starts.
    The issue stems around taxes and am disturbed to see up to the end point, it’s not clear how to deal with taxes on such a big deal.
    If this is not reviewed seriously with a business mind, nothing will be unlocked.

  3. Wilson Komakech

    His Excellent is right, make the right decision for the future.
    1 like our man, no bullying, full stop.

    • ejakait engoraton

      THIS is playing to the gallery and naive people like you

      HE is trying to appear macho but at the end of the day, these oil companies have been in the business for a very long time, and though may appear as if they are different oil companies while negotiating with the idiots and greedy people that most of our RULERS are, they are a cartel and they hunt together like a pack of wolves and they will ultimately get their prey.

      IT is just a question of them being able to pay the right price, they know very well, just like in any negotiation, each side tries to play hard, in order to extract the maximum, but they know at some point there will be a meeting point.

      AND our RULER is not playing hardball in order to benefit the country, but like he said in his statement with the KENYAN journalist, and again while giving a speech was it in Fort Portal, he is not anyone’s servant and he is working for his interests and those of his children and grandchildren. If he does anything that benefits the country, it is purely by accident or as a by product of taking care of his interests.

      SO what makes some fools think that on this particular occasion he has the interests of poor UGANDA at heart.

      ONE of the few leaders we have had who could not be compromised was IDI AMIN, whatever other shortcomings he may have had.

      DREAM ON

    • Yes His Excellence is right. Magufuli style, is the best way to go. Proper negotiations favouring the Government and Wanaichi

  4. HE, keep strong. That is the way to go. We appreciate your understanding of issues.

  5. ejakait engoraton

    IT is because of this oil that someone went to the bush leading to the killing of so many innocent people and the destruction of peoples property.

    ONE intelligence officer, then working in Obote’s presidents office, in the economic intelligence department under the now heavily rehabilitated Rwakasisi, came across information that Uganda was sitting on oil.

    IN his twisted mind, he decided then, that it would be him and him only who would preside over the production of that oil, and promptly used that information, notably from the likes of Tiny Rowland of LOHNRO to obtain financing for killing Ugandans in unwarranted wars.

    EVEN up to now , it is the reason for super gluing himself to power and as you have severally heard calling it “MY OIL” and id++ts like John, Peace, Komakekech think that he is fighting for their interests.

    Believe me, one of the reasons the oil is delaying is because it is heavily mortgaged .

    • I have it from a well placed knower that the oil will be drilled to pay (not to earn revenue) an already stashed away debt. The ‘owner’ of the oil, utilising benefit of hindsight and learning from others’ mistakes, opted to be paid first so that any fights will be against international companies; who already own it. The ‘oil-owner’ is cleverer than all people combined………….has out-foxed them again. Who said you cannot fool all the people all the time? with Ugandans it looks like it is possible.

  6. Biggness Lebowski

    Sorry to say it but Uganda will never produce any oil.

    The investors would first have to sanction a project for $20bn, to fund oil field development to production, build the pipeline and refinery.

    They would have to be insane as they would be guaranteed to lose all their investment.

    Uganda is completely uninvestable.

    But as far as the ordinary Ugandan is concerned, maybe it is for the best, the big men would take it all anyway.

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