Uganda’s secrecy invites the oil curse

The Government of Uganda has finally approved Tullow Oil’s bid to buy out partner Heritage Oil from two blocks of oilfields in the west of the country that the two firms own equally.

This puts an end to Tullow’s bid-war with oil production giant Eni, which had offered $1.5 billion to Heritage before Tullow used its pre-emption rights and matched that offer. 

These rights come from Tullow’s contract with Heritage requiring any one of them who wanted to sell out, to consider the other partner first.

Prior to this approval, Energy Minister Hillary Onek had published a statement that cast doubt on Tullow’s bid to buy out Heritage by raising concerns about creating a monopoly of the buyer who would then own 100 per cent of the oil wells. 

Tullow subsequently met President Yoweri Museveni to lobby for their bid, which led the ministry to withdraw Mr Onek’s utterances and state that no position had been reached as yet.

The government’s ultimate decision to allow Tullow to buy out its partner seems to have gone against the widely accepted criteria for protecting national interest in the oil sector — avoiding monopoly, deep investment potential, quick commercialisation of oil, and listing on the local bourse. 

Eni was in a strong position to take this deal because it would be a new entrant, and has far more financial clout than Tullow. 

This means the government has decided to respect the contract between the firms at the expense of the national interest.

However, no one knows what exactly made the executive reach that decision, giving rise to suspicions among legislators and journalists that the oil curse is set to be visited upon Uganda.

The executive has continued to hold the agreements it signed with oil companies close to its chest, ignoring requests from legislators and journalists for information needed to make informed policies and accurate reports in the media. 

Last week, the courts dismissed an application by two journalists compelling the government to make those agreements public , citing national confidentiality, while ignoring a new law that guarantees access to information.

It goes without saying that transparency is key to warding off the oil curse; the Ugandan government should reconsider, come clean on its dealings with oil companies and subscribe to the Extractive Industries Transparency Initiative that requires governments and companies to make full disclosure.

The EITI International Secretariat has sought to establish the among the standards and codes used in the African Peer Review Mechanism. Indeed, the Uganda APRM report includes a recommendation to implement the EITI, and the Commission of the African Union is now recommending EITI implementation to its resource-rich member countries.