Q&A: Avoiding the Resource Curse in Uganda

The following Q&A and photo essay originally appeared on allAfrica.com, and are reposted with permission.

Uganda stands to be the latest African country to benefit from newly discovered resources of oil. If used successfully, the nation’s petroleum reserves could spur development and improve the lives of millions of Ugandans. But if used improperly – with lack of transparency and insufficient regard for the environment – Uganda could become stricken by the “resource curse,” or a negative overall impact despite great potential to improve a nation’s wellbeing.

WRI is working with Ugandan non-governmental organizations to help assure that Uganda’s petroleum industry is transparent, benefits all Ugandans and is environmentally careful. Peter Veit, a senior fellow at WRI, and associate Florence Landsberg, discussed the impact of the discovery of oil in Uganda with allAfrica’s Cindy Shiner.

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Tell us about WRI’s work in Uganda.

Veit: We’ve been working in Uganda for over 20 years on a range of issues that place us nicely to deal with some of the oil issues. We have been looking at alternative revenue-sharing formulas for oil revenue management and reinvestment. We’ve been looking at issues of disclosure and transparency, specifically on the production-sharing agreements, but also more broadly on oil revenue information.

Florence [Landsberg] has been working on the environmental aspect of the potential oil effects, both to protected areas and, perhaps most importantly, on local populations around Lake Albert. More recently we’ve been working on land-grabbing issues in the oil districts. Land values have increased, the number of land transactions has increased and the number of non-Bonyoro people that have acquired land in the oil districts has increased significantly.

What are the potential environmental impacts? The Albertine Rift has great value for its biodiversity.

Landsberg: There are direct impacts; they are going to convert wild areas to settlement and things like that. But I would like to speak about the indirect impacts.

For example, the Albertine Rift in Uganda used to be quite remote. You will have more migrations of more people into the area, and better roads. The rate at which natural resources are used is going to increase - which could be an opportunity for development, except that it is not likely to be sustainable. Many local populations around the lake are fisher folks. They already have a hard time, because there are less fish and they are smaller. And now that there are more people around the lake and more access to markets, there has been more overfishing, so the situation is worsening.

You said that development would not be sustainable – why?

Landsberg: The fish stock is already at risk, because there is more catching of fish that are not mature. The upgrade of the roads has allowed for more fish to be exported. The restocking of the fish is not going to happen if there is no intervention.

Veit: To add to that, many scientists will tell you that the Albertine Rift is the most biologically diverse area in all of Africa. There are national parks, wildlife sanctuaries, forest reserves, and there already is some impact on these protected areas. For example, there is drilling in Murchison Falls National Park, even though many public interest environmental lawyers in Uganda will tell you that the law does not allow that. Kenneth Kakuru of Greenwatch has filed a pleading in the High Court over extractive resource industries in national parks.

There was already discussion of de-gazetting one of the parks to make way for an oil refinery. There is discussion of a pipeline that would take the oil to Mombassa that would have effects on biodiversity. And there is also discussion about oil workers poaching inside protected areas.

How receptive has the government of Uganda been to these issues being brought to their attention?

Veit: There’s what appears to be an interesting split between the president, his cabinet and the oil department, versus the forestry department and the Uganda Wildlife Authority. On one hand, the Wildlife Authority has threatened to kick Tullow Oil workers out of some parks. (More here.) On the other hand, there seems to be no stopping extractive industries from operating in fully protected national parks such as Murchison.

Ken Kakuru tells me that the law allows for extractive industries in reserves and sanctuaries, but not in national parks. Even if Ken’s case succeeds and the judge rules that drilling is illegal, I would not be surprised if the judge does not order the government to stop all drilling in national parks. Even if he does, I suspect the government would either not comply or simply change the law.

How much power do wildlife authorities have to follow through on threats to expel oil workers?

Veit: Not sure. But even if they have the legal authority to do so, it is unclear whether they would actually do so. My sense is that they are using the media to raise the profile and push Tullow to be more careful and watchful. Tullow doesn’t want this type of publicity.

The bottom line is: drilling is taking place in Murchison Falls and in some of the forest reserves and sanctuaries as well. The National Environment Management Authority (Nema), which approves the environmental impact assessments (EIAs), is under some political pressure in reviewing these EIAs. As far as we know, most, or all of the EIAs have been approved - an indicator that suggests the oil sector will continue to be developed. I don’t know of any oil EIAs that were rejected by Nema, although they have called for changes in the associated mitigation plans.

Landsberg: There was one project, the early production scheme, that was inside a gazetted area, that at the very last moment actually stopped. They located somewhere else. So it does happen.

Veit: An oil refinery there, which was targeted to be placed within a protected area, was subsequently scrapped. But the information we have suggest that it had less to do with the Uganda Wildlife Authority and more to do with the European funder, who was not happy.

To what degree is there enough transparency and fairness in governance to assure that the wildlife and environment authorities have genuine power?

Veit: Probably not enough. I doubt [President Yoweri] Museveni would allow drilling to stop. Eventually he would step in and broker some agreement.

We’re not privy to those discussions. The EIAs that have been approved usually come back with some conditions, which need to be met by the oil companies before they can proceed. But the bottom line is that oil development will progress in that area. There’s just too much oil, and it means too much for Uganda as a whole.

Landsberg: Under certain conditions that can be good. Establishing these conditions is the role of environmental impact assessments at project level and the strategic environmental impact assessments at regional level. That’s where there could be some improvement. The strategic environmental impact assessment hasn’t taken place yet.

The strategic environmental assessment aims at comparing different development alternatives at a regional level. It means that you don’t only look at oil development. You weigh a scenario with oil development versus a scenario with some oil, some renewable energy, some tourism development, for example. It could translate into a zoning where no oil development would be allowed in order to preserve the area’s tourist potential. A strategic environment assessment will provide the regional context in which the impacts of a specific project will happen, which will be addressed in the project EIA.

What effect do you think this year’s elections might have in terms of Uganda’s oil, how it is used and the transparency process?

Veit: If Museveni wins then probably not much. If [Kizza] Besigye wins, perhaps. The parliamentary elections are more interesting in this regard. If the opposition picks up a number of seats then they may be powerful enough to change matters. There is a caucus of MPs on oil, which can be influential.

You had mentioned problems of land grabbing. Are there proper land-use laws in place in Uganda?

Veit: Uganda’s land law recognizes undocumented customary tenure arrangement, but in practice, it can be difficult for rural people to protect their customary holdings. Much of the ‘land grabbing’ is legal. The law provides opportunities for well-connected and well-heeled individuals to acquire land through the legal processes. So a lot of that land is being taken and held in speculation for when the likely development that comes with the oil sector takes place.

I have been told that when rural people see oil workers coming on their land, they quickly sell it out of fear that the government will just expropriate it and they won’t get anything. There are more land transactions taking place in western Uganda than in any other part of the country. Many of the transactions are resulting in new owners who are not Bunyoro or Acholi – the traditional groups in western Uganda.

What we’re trying to do is create more transparency around some of these transactions. A lot of them are willing seller-willing buyer types of arrangements. But a lot of the land in that area is held under customary land arrangements, is undocumented and the transactions are being done in ways that are not clear until it’s been finalized. That’s one of the problems – the fact that a lot of it is undocumented, unregistered, untitled land. Nobody knows how much land is actually titled and registered in Uganda, but it’s actually a very, very small percentage.

Is this creating any tension locally?

Veit: Most of that area is claimed by the Bunyoro Kingdom and most of the people acquiring land are non-Bunyoro people. That’s creating problems, because a lot of people make their living off the land. When they sell their land, it creates problems for their livelihoods and well-being.

Which major oil companies are operating in Uganda?

The three companies that hold oil real estate in Uganda are Tullow, Tower and Dominion, all UK exploration companies. Tullow has made the major find in Lake Albert. They are hoping to transfer themselves into an oil production company as well. But in order to speed up production, they want to sell a third of their shares to Total France and another third to a Chinese oil company, CNOOC (China National Offshore Oil Company). That sale has not yet been approved by the government of Uganda. It’s partly held up by some capital gains tax the government claims that Tullow owes them.

Do you think there will be any difference in terms of impact if a Chinese company comes in?

Veit: We’ve been grappling with that question ourselves. WRI has an office in China that we recently opened, and we have an effort ongoing to do two things. One is to put in place better social and environmental safeguards with Chinese banks that are investing in the Chinese national oil companies. The second is to work more closely with the Chinese companies themselves to make sure they actually implement those higher standards. We have been meeting with Chinese oil companies in Beijing and briefing them on Uganda laws.

The recent Wall Street Reform [and Consumer Protection] Act here in the United States requires companies to submit annual reports to the SEC (Securities and Exchange Commission) and be much more open about the revenues that they pay foreign governments. The Chinese company that is likely to buy some of these shares, as well as Total, would qualify, and therefore in their annual reports to the SEC they might have to be much more open about some of their dealings with the government of Uganda. (See WRI’s working paper for more details.)

Uganda stands to potentially gain quite a lot through its oil resources. From the work you’ve done so far, do you see a trend that indicates a positive outcome for the country’s development?

Landsberg: Locally, there are better roads, better infrastructure, better healthcare and education. There are good things for sure. The fact that people can export their fish to market is a good thing. Now it really depends - are they going to do it for two years, three years or forever? It’s about sustainability at the local level.

I think it’s a great opportunity for Uganda, and all local NGOs agree on that. We just want to make sure it’s done the best way possible.

Veit: Tullow Oil certainly has made an effort to invest in the areas in which they are drilling. That’s a good thing. The real prize here is when the oil production starts and the oil revenues begin to flow. There are statements by the president of Uganda and other senior officials that they will manage these oil revenues in ways that will promote economic growth and poverty reduction. A lot of this will be codified in three promised petroleum bills that are supposed to be presented to parliament this year and next.

We won’t know the details until those bills are public. Only one has been released so far, and it doesn’t deal with oil revenue management and reinvestment. However, it does deal with transparency issues. The public statements the president has made on transparency are not consistent with what we see in the first of these petroleum bills. The bill is much more secretive and does not allow as much disclosure on production and revenue as the president has promised or that’s in the national oil policy. So we’re a little nervous.

The Norwegians are providing guidance to the [Ugandan] government and that bodes well, because the Norwegians have done well at managing their oil. So if you have anybody in there advising the government, that’s probably a good set of actors to do so. There’s a very active NGO society, and parliamentarians are beginning to speak up on these issues. Even the High Court. For example, several years ago, Ken Kakuru took a case to the High Court to have a Power Purchase Agreement for a dam declared a public document. He won. Yet, recently, a Magistrate Court ruled that the oil Production Sharing Agreements (PSAs) do not need to be released. I believe Ken will win his up-coming case in the High Court regarding the PSAs. It has made some rulings that would suggest that they have some independence from the executive branch on these matters.