Oil revenues alone cannot fund Uganda’s energy transition, experts warn

Kampala, Uganda | URN | The expected oil revenues could provide an important source of financing for the country’s Energy Transition Plan (ETP), but they will not be sufficient on their own to fund investments required to transform the energy sector and achieve broader development goals, experts have said.

The warning emerged during a dialogue on energy transition financing and the management of petroleum revenues.

The dialogue, funded by the Natural Resources Governance Institute NRGI brought together the government officials and civil society actors under the Civil Society Coalition on Oil and Gas (CSCO) to examine whether proceeds from Uganda’s Petroleum Fund can support the country’s shift toward cleaner and more sustainable energy systems.

Through the Energy Transition Plan, the government set five goals to enable Uganda to transition to the use of modern energy.

These include: providing universal access to electricity and cleaner cooking by 2030; to modernise and diversify Uganda’s energy mix and promote its efficient use across all sectors to support industrial growth, poverty reduction, and socioeconomic transformation; and ensuring a secure, affordable energy supply.

Others include mitigating energy emissions in line with Uganda’s conditional climate commitments, which imply a 20% reduction, compared to baseline emissions in 2030, and positioning Uganda as an energy hub for the East African region.

To enable universal access to modern energy by 2030, the government projected that in 2030, 45% of the population would have access to grid power. Under the National Energy Policy 2023, the government aims to reach universal access to electricity and 50% access to clean cooking by 2040.

Aron Werikhe, a planner at the National Planning Authority (NPA), said Uganda has made significant progress in expanding access to electricity, with national access rising from 24 percent in 2021 to 51.5 percent today. The improvement has been driven by investments in electricity generation, including the commissioning of the 600-megawatt Karuma Hydropower Project, alongside increased adoption of off-grid solar technologies.

Werikhe said the government aims to connect 300,000 households annually, although actual connections average between 190,000 and 220,000 households each year.

Despite the progress, he noted that Uganda continues to face major challenges in transmitting and distributing power to consumers. “The issue is not what we are generating. We have enough power, but some of it is lying idle because of underinvestment in transmission,” Werikhe said.

He explained that while Uganda has expanded generation capacity, investments in transmission and distribution infrastructure have lagged, limiting the country’s ability to evacuate electricity and connect more households and businesses to the grid.

Werikhe, who is also in charge of Climate Risk & Environment & Social Safeguards at NPA, said the Energy Transition Plan seeks to address those challenges while supporting broader development objectives, including green industrialization, clean cooking, job creation, poverty reduction, climate resilience, and environmental sustainability.

According to NPA estimates, implementation of the Energy Transition Plan will require approximately US$8 billion annually to reach universal access over the next five years, equivalent to about US$850 million annually.

It is estimated that Uganda may require $325 billion overall for clean energy investment as per the Energy Transition Plan developed by the Ministry of Energy and International partners. From the estimates, the country will face a shortfall of $100 billion.

The plan also seeks to halt environmental degradation, restore forest landscapes, reduce social inequalities, and empower women and vulnerable groups. “Climate action leaves no one behind,” Werikhe emphasized.

The discussion then turned to whether Uganda’s anticipated oil revenues would be sufficient to finance those ambitions.

Presenting an analysis of projected petroleum revenues, Extractive Industries Coordinator at Oxfam, Uganda, Magara Siraji Luyima, said Uganda’s recoverable oil reserves of about 6.5 billion barrels could generate between US$1.5 billion and US$2.5 billion annually, depending on international crude oil prices once commercial production begins.

Magara said all petroleum revenues would be channelled through the Petroleum Fund established under the Public Finance Management Act, receiving income from taxes, royalties, profit oil, government participation through the Uganda National Oil Company (UNOC), and other petroleum-related earnings.

“Our interest is to find out whether the funds will be used transparently and equitably and whether they can support the clean energy transition,” Magara said.

However, he cautioned that oil revenues alone would not be enough to meet Uganda’s energy transition financing requirements.

Referring to the NPA projections, Magara said that even under favourable oil price scenarios, petroleum revenues would fall short of the country’s long-term investment needs.

“Do we have enough money to finance the energy transition from that? Or do we still have to look for other sources?” Magara asked.  He cautioned that Uganda shoud not only rely on contributions from the oil and gas sector to fund green energy initiatives.

“Even if you committed all the money from oil to energy transition, you would still not raise the money. That means oil is not something that we are going to rely on alone to finance our energy transition,” he said.

The government has already projected approximately 1.44 trillion shillings in oil and gas revenues in the current financial year, signalling expectations that commercial oil production could commence soon.

But Magara noted that not all petroleum revenues deposited into the Petroleum Fund will be available for immediate spending.

Under Uganda’s fiscal framework, part of the money is transferred to the Consolidated Fund to support government expenditure, while the remainder is saved in the Petroleum Revenue Investment Reserve for future generations.

The analysts therefore argued that Uganda will require a broader financing strategy that combines petroleum revenues with domestic resource mobilization, private-sector investment, development finance, and international climate funding.

Participants also pointed to lessons from the mining sector, particularly the gold industry, where export earnings have surged, but government revenues have remained relatively low.

They cited data showing that several gold-exporting companies paid little or no export levies despite significant export volumes, raising concerns about revenue collection and accountability in the extractives sector.

Some participants called for renewed advocacy to restore gold royalties and strengthen oversight of mineral exports, arguing that Uganda risks losing valuable revenue needed to finance development priorities.

At the same time, speakers welcomed recent improvements in transparency following Uganda’s participation in the Extractive Industries Transparency Initiative (EITI), which has made more information on extractive revenues publicly available and enabled more evidence-based debate on resource governance.

As Uganda prepares for its first oil, experts said the key question is no longer whether petroleum revenues will be generated, but whether they will be managed effectively and invested in ways that support sustainable and inclusive development.

They argued that the success of Uganda’s Energy Transition Plan should not be measured solely by the amount of electricity generated or the number of new connections made, but by its ability to create jobs, reduce poverty, restore ecosystems, strengthen local economies, and improve the lives of ordinary citizens.

While oil revenues could provide an important boost, the consensus from the dialogue was clear: Uganda’s energy transition will require a mix of financing sources and strong governance if it is to deliver lasting benefits and ensure that no one is left behind.