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Speculative exploration is hardening into pending production in Uganda BUT new discoveries elsewhere may begin a phase of competition rather than cooperation.

sartore-joel-oil-rig-pumps-oil-from-the-montana-groundUganda plans for a domestic refinery which are predicated on the potential sale of oil products to the crucial Kenyan market. The Turkana discoveries will change the feasibility of pinning hopes on local consumption. Week after week events, too, are undermining long-term visions. South Sudan’s dispute with Khartoum means it now wants to build a new pipeline through Kenya to Lamu, a project that could prove fatal to Ugandan plans to also export (its waxier, less attractive) crude east from Lake Albert.

Regional competition over discoveries is also strengthening businesses’ hands. Operating in area’s the majors wouldn’t touch created opportunities for small wildcats like Heritage to negotiate hard: the contacts for exploration and production signed since the late 1990s proved extremely favourable to businessmen rather than governments.

Uganda-OilThe pressure is on to export rather than process domestically, and to lighten tax regimes to attract investment. The signs are that the cash, when it comes, will serve to encourage the worst, not the most progressive, trends in East African economic growth. Staple food inflation, youth unemployment and low agricultural productivity will remain unaffected or grow worse. Only fuel may become cheaper in the medium to long-term, but even that is far from a given, as experience in West Africa has shown.

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