With the maze and craze that shrouds the oil industry; obviously Uganda’s oil was expected to be the biggest attraction for investment deals. But with the squabbles over various issues like the stabilization clauses, field development plans, input tax, capital gains tax and assessments it may come off as little or no surprise that the squabbles only slowed down activity in the industry thus hampering investment in the sector.
Investors must have taken cautious measures before engaging in such a conflict- prone business environment while hoping that the disputes will be resolved sooner rather than later. Investors usually look out for countries with less bureaucracy and better trade rules to channel their funds. Uganda was definitely not looking like the country that had such conducive incentives.
“Even with its oil industry the most talked-about sector in East Africa these days,” as the Observer puts it, Uganda could not generate as many private equity deals as its counterparts Kenya and Tanzania. According to Deloitte’s 2013 East Africa Private Equity Confidence Survey, Kenya had the biggest number of the deals after close to $475m was invested in the region, with the agribusiness taking a bigger slice of this money.
“Respondents were also excited about Uganda, but this was not reflected by 2012 deal activity – perhaps because the main excitement, oil, is still a few years away from generating significant revenue,” the report reveals.
Uganda has so far discovered 3.5 billion barrels of oil. According to Fred Kabagambe-Kaliisa, Permanent Secretary in the ministry of Energy, the asset worth of Uganda’s oil stands at $150bn today.
Production of the first barrel of oil is expected around 2016. To get there, though, Uganda needs to build a refinery and an export pipeline, both of which form part of a broad infrastructure development plan that is to cost more than $10bn.