A mid a new round of economic uncertainties, China’s willingness to take on more of the risks associated with Uganda’s resource management ambitions looks set to boost President Yoweri Museveni’s domestic and regional standing for a while longer. With the next general elections two years away, the government can be expected to design some of its political messages around China’s new commitment to fast-track the kind of major projects that promise business opportunities for Ugandans.
Once China gets started in earnest, sometime in 2014, on the heavy work of developing Uganda’s oil, minerals and energy industries, the scale of its involvement can be fully assessed. With the largest deals now signed, Ugandans can get a sense of just how deeply the Asian heavyweight will dig into the economy, and how this will affect the country’s political power games. Each of the schemes China has backed had previously been held up by high-stakes infighting within the corridors of power.
Once China gets started in earnest, sometime in 2014, on the heavy work of developing Uganda’s oil, minerals and energy industries, the scale of its involvement can be fully assessed. With the largest deals now signed, Ugandans can get a sense of just how deeply the Asian heavyweight will dig into the economy, and how this will affect the country’s political power games. Each of the schemes China has backed had previously been held up by high-stakes infighting within the corridors of power.
POWER AND OIL
The two largest commitments have come from Sinohydro and China National Offshore Oil Company (CNOOC). Sinohydrohas started preparing the ground for the construction of a $2.2bn hydroelectric dam at Karuma with a capacity to produce 600MW. CNOOC, the first company to receive an oil production licence in Uganda,will spend $2bn getting Lake Albert’s Kingfisher field into production over the next four years. Some 196m barrels are recoverable and production will be at 30,000-40,000 barrels per day. The project includes a refinery and road construction where no roads currently exist.
A third project involves Tibet-Hima, a consortium of Chinese investors,which has won the bid to revive copper production at Kilembe, the country’s largest mine. The investors have promised to sink $175m into the scheme in the first three years, including putting a railway line in place to reduce the cost of transporting machinery and minerals.
FREEDOMS DIMINISHED
Trouble will arise, however, when Museveni finally signs into law the Public Order Management Bill, which has come under heavy criticism from civil rights groups and opposition politicians. Requiring police consent for gatherings of more than three people, the bill seems certain to narrow the space for political debate and to set opposition groups and the police on a collision course.
Such developments worry Elly Karuhanga, chairman of the Uganda Chamber of Mines and Petroleum, a body that promotes the interests of investors in the oil and minerals sectors. “Capital is a coward. If it senses any trouble, it will flee,” he said.
CRITICAL DECISIONS ON THE OIL ECONOMY STILL TO COME
INVESTORS WILL BE KEEPING a close eye on the government’s plans for the National Oil Company and the Petroleum Authority, both of which should be set up before the end of 2014. There is avid speculation over who will head these institutions, but of greater importance will be how the country goes about the next round of licensing of blocks and speeds up its move towards oil production.
In achieving commercial viability, the government’s stated priority of installing a local refinery ahead of building a crude oil export pipeline is still to be tested. The plan is to start small with a refinery to process 20,000 barrels per day (bpd) and expand this to 60,000 bpd by the end of the decade. The government has invited its partner states in the East African Community to take a 10% equity stake in the refinery. Their participation could be decisive.
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