Commercial oil production promises to transform Uganda

23 Jun 16

Commencing commercial oil production in Uganda could drive the country’s socio-economic transformation if the proceeds are well managed, the World Bank has said.

Its Country Economic Memorandum for Uganda, published today, found that the proceeds from oil could accelerate growth and reduce poverty if it is ploughed into agriculture, infrastructure and human capital development.

“Uganda has an opportunity to get the economics right,” explained Christina Malmberg-Calvo, World Bank country director for Uganda.

“If oil resources are well managed it could take the country a lot less time to achieve its national vision of attaining upper middle income by 2040.”

She said this will mean “pumping oil profits back into sectors that will have huge economic spill-overs” to the most vulnerable and the poorest people.

Uganda is set to begin pumping its first commercial oil in 2018 after substantial reserves were discovered near the country’s border with the Democratic Republic of Congo in 2006. With only 40% of the country’s potential explored so far, there is also hope of further finds.

A consortium of companies led by UK-based Tullow Oil, Total and China National Offshore Oil Corporation hopes to produce up to 60,000 barrels per day, which could increase to 120,000.

The bank said that once production commences the formerly agriculture-reliant country could earn up to $2bn annually in revenues, providing a “springboard” to transform its slowing economy.

The Ugandan government sees economic diversification as a key component of its development strategy, and the bank has identified opportunities for firms throughout the oil industry. These range from drilling services, production, maintenance, geological services, engineering and construction.

The bank estimates these could generate an estimated 15,000 jobs for the country’s unemployed youth.

It is also hoped oil proceeds will raise living standards in Uganda, where poverty has been reduced to 19% but more than one third of the population remain poor and vulnerable to shocks.

But the World Bank pointed out that oil production in emerging economies is prone to conflict and corruption, and often further polarises income distribution rather than boosting shared prosperity.

Its memorandum highlights a number of measures, including policies, institution building and transparency and accountability provisions to help Uganda regulate the sector. 

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