Big Oil’s grip on Uganda begins to slip with Museveni-Tehran deal

Monday May 25 2009

President Yoweri Museveni tours Razavi Food

President Yoweri Museveni tours Razavi Food Products Company during his three-day tour of Iran recently. Picture: Presidential Press Service 


The emergence of Iran as a player in Uganda’s oil programme is likely to send jitters through Big Oil as it apparently gives President Yoweri Museveni a trump card in ongoing wrangles with at least one prospector.

According to sources familiar with the behind-the-scenes manoeuvring, the president is asking oil companies to explain why it would be unprofitable to refine oil in Uganda and yet viable to refine it abroad.

A  communiqué  issued at the end of President Museveni’s visit to Tehran said Iran had signed a co-operation agreement that among other things covered funding for the entire value chain of Uganda’s oil production including the construction of an oil refinery in Uganda.

Sources further tell The EastAfrican that although publicly, the postponement of Uganda’s early production programme from this year to 2010 has been attributed to the need to revise production models after more oil reserves were confirmed late last year, privately, the government has been banging tables with the prospector who now prefers to build a pipeline from western Uganda to Mombasa.

Under the revised proposals, the pipeline will then be used to transport crude oil for export and leave whatever is required for Uganda’s domestic needs to be processed at the Mombasa refinery.

Kampala is opposed to the plan over what President Museveni describes as “donating value” if crude oil were exported and the likely loss of independence as Uganda’s own petroleum needs would continue to be hostage to logistical glitches along the import route from Mombasa.

Analysts now believe that President Museveni’s success in getting funding for a refinery, potentially breaks the stranglehold Western interests had acquired on the Ugandan programme as the head of state intends to go it alone if need be.

Putting Museveni’s visit to Tehran in context, his press secretary Tamale Mirundi said the president’s position on oil was informed by the experience of other African countries where the population had remained poor despite their discovery of oil.

He has been seeking the experience of developing countries that have maintained an independent stance and yet managed to develop a successful oil industry, Mr Mirundi said.

In the past year, President Museveni has been to Trinidad and Tobago, Malaysia and Nigeria.

In Abuja, he reportedly drew cheers during one of his speeches when he asked what kind of charity Western oil companies were engaged in when they argue that it was unprofitable to refine oil in some developing countries, yet they were willing to do it for free in Europe.

Nigeria has a notoriously contentious oil industry that has left locals feeling cheated and fuelled a series of insurgencies and rebel militias; concerns were by big business last year when it emerged that Uganda was seeking to borrow a leaf from the Nigerian oil experience.