Godber Tumushabe Executive Director/Policy Analyst Advocates - - PowerPoint PPT Presentation

CRITICAL REFLECTIONS ON OIL GOVERNANCE DISCOURSE IN UGANDA

Godber Tumushabe Executive Director/Policy Analyst Advocates Coalition for Development and Environment (ACODE) www.acode-u.org Africa Centre for Media Excellency Kampala: November 21, 2011

Structure of the presentation

• Theoretical Underpinning of the

presentation

• Consensus issues in the current oil discourse
• Outstanding concerns of public interest
• Responsibility
• Accountability and transparency
• The BIG PICTURE SYSTEMIC FAILURES-

failures militate against responsible exploitation of oil.

Key Elements of governance Critical for Transparency in the Oil Sector

• State Capacity – related to a states‟ power and

ability to enforce rules that are consistent and predictable.

• Rule of law – that establishes among other

things property rights and limits the states‟ discretion in manipulating those rules.

• Democratic institutions – that further limit

exercise of state discretion by holding governments accountable to their citizens.

• An active citizenry - devoid of fear and

manipulation that acts as front line defenders of democracy [modified from Francis Fukuyama]

Causes of Governance Failures

Bad Laws

Low Public Sector Capacity

Political Market Imperfections

Uninforme d Citizenry Political Credibility

Polarization

Consensus Issues on Oil Governance in Uganda

• Oil discovery is

a tremendous economic

• pportunity for

Uganda.

 Estimated

consumption -10,000 barrels of oil/day.

 Estimated petroleum

import bill of UGX30 billion annually

 AND THEN the

export of excess.

Consensus Issues on Oil Governance in Uganda

• The potential

revenue windfall could help the country address major production infrastructural constraints.

Consensus Issues on Oil Governance in Uganda

 Government and

industry are less than transparent in their current dealings on

• il.

 In this debate, it is

• nly GoU officials

who believe that they are more than transparent!

 “Be transparent on

• il exploitation” –

New Vision editorial,

• Feb. 19, 2010.

 “Spare Ugandans the

„Oil Curse‟” – Saturday Monitor editorial, Feb. 20, 2010.

 Pending court cases.

Consensus Issues on Oil Governance in Uganda

 And then the BIG IF -  “Oil revenues will not

be used for consumption and importing perfumes, wines, cars and paying

• salaries. We shall use it

as a finite resource to create infinite capacity for Ugandans,”

 BUT public funds have been

used to buy cars and pay salaries and build the current political patronage network!

 “If Museveni keeps his

word, the nation that has long been content as an economic underdog could level the playing field.”

Outstanding Concerns of Public Interest Responsibility and Accountability

 The current institutional architecture blurs lines

• f responsibility and accountability.

 Until recently, the parliament has taken a

spectator role and has consistently been ignored on details concerning oil exploitation activities.

 The fusion between the political, legislative and

administrative responsibilities are inconsistent with accountability and transparency. [Best illustrated by the CHOGM Case]

Transparency and Access to Information

• Contestation over the disclosure of PSAs –

disclosure the key pre-condition to mobilizing citizens and CSOs around a common national objective

• Failure to conclude subscription to the

Extractive Industries Transparency Initiative – in spite of the policy commitment (objective 6 of the policy).

• Access to drilling sites by environmental

inspectors and relevant legislators.

GoU-Corporate blackout conspiracy!

• Government of Uganda:-

confidentiality clauses militate against release of the PSAs.

• Oil Companies:- we can

release the agreements if

• nly GoU consented?
• The big brother

syndrome- Government knows what is best for you!

 Tullow eyes two partners for Uganda oil 19 Feb 2010 12:30 GMT

... Tullow eyes two partners for Uganda oil Tullow Oil may choose both China's CNOOC and ... and France's Total as partners to develop oil fields in Uganda, where output will be around ...

 Tullow: Uganda oil output could double 19 Feb 2010 16:15 GMT

... Tullow Oil said today it could end up producing more than ... twice as much oil as expected in Uganda in the coming years if the right ... in the DJ Stoxx European oil and gas sector index. Chief Executive Aidan Heavey said ...

 Rights group criticises Ugandan oil deals 15 Feb 2010 23:16 GMT

... 15 - Production sharing agreements signed by Uganda with oil explorers give the firms too many protections ... surge in investor interest in its nascent petroleum industry. According to the report by Platform, ...

 Tullow says will buy Heritage's Uganda oil assets 19 Feb 2010 15:12 GMT

... Tullow says will buy Heritage's Uganda oil assets An oil exploration tower in Tonya on ... Tullow by itself also owns a separate oil field zone. Under a previously negotiated contract, Tullow ...

 Oil Giants Rush to Get Foot in Door 15 Feb 2010 13:50 GMT

... Russian, Chinese, French, Italian, Indian and other oil companies are among firms that have already expressed ... have already expressed interest in investing in Uganda's oil reserves estimated at 2 billion barrels ... expressed interest in joining Uganda's oil and gas sector by partnering with Tullow. It quoted ...

 Did Tullow Oil Short-Change Uganda? 15 Feb 2010 13:54 GMT

... which suggests that Tullow must have short-changed Uganda in the negotiation of its oil contract in that

• country. The report affirms ... gas potential, with contracts signed with Hardman Petroleum, Energy Africa,

and Heritage Oil. Exploration Area ...

 Peak oil review - Feb 15 15 Feb 2010 16:10 GMT

... Oil prices rose modestly last week on conflicting news. ... to buy a stake in a big Uganda field also fell

• through. The opposition also ... #8) Turkmenistan, holder of the world’s fourth-largest gas reserves, is

seeking bids from foreign producers ...

 Latest Oil Finds Amount To Spit In The Bucket 16 Feb 2010 05:30 GMT

... The oil industry was on a hot streak in ... For example, a new field found in Uganda last year is anticipated to yield two ... years. Dalton Garis, of the Abu Dhabi-based Petroleum Institute, warned of the possibility that "prices ...

 Oil Pipeline Project Cost Hits Shs 600 Billion 17 Feb 2010 21:06 GMT

... the fate of its plan, jointly with Uganda, to extend the oil pipeline from Eldoret to Kampala. It cites ... account in any future investments on the petroleum infrastructure," said an analyst in the Business ...

 Govt sets terms for oil companies 17 Feb 2010 21:36 GMT

... new companies intending to invest in the oil production in the country. The permanent secretary ... of the resources, value addition, training of Ugandans and paying taxes. In order to approve ... bigger player expresses interest in joining the petroleum industry, it signifies benefits to the country, ...

 Tullow says Uganda output could be double target 19 Feb 2010 16:14 GMT

... target DAKAR, Feb 19 - Explorer Tullow Oil said it could end up producing more ... twice as much oil as expected in Uganda in the coming years if the right ... in the DJ Stoxx European oil and gas sector index <.SXEP>. A Tullow spokesman said ...

 Uganda needs $8 bln to develop oil industry -govt 17 Feb 2010 22:47 GMT

... invited to pitch plans to government * Uganda to earn $300 mln-400 mln in tax ... next decade to develop its newly discovered oil and gas resources and bring them to ... surge in investor interest in its nascent petroleum industry. Uganda needs the money to finance ...

Source: World News Report [Sunday Feb. 21, 2010 at 06:15 hrs] http://www.einnews.com/uganda/newsfeed-uganda-oil Media Frenzy in the Face of State-Corporate Conspiracy of Silence

Revenue Sharing and Balance of Power

 Central government control of oil revenue will increase

the imbalance of power between the centre and local governments.

 Under the current budget architecture, app. 70% of the

national budget is spent by central government and

• nly app. 30% by district.

 This dependence is the foundation for building political

patronage, undermines democracy and local accountability.

 A new revenue sharing structure must target at

destroying and eliminating the big brother mentality.

• Chinese join Tullow, Eni SPA tug of war
• Activists drag UK govt to court over aiding Tullow
• Eni to invest Shs25 trillion in Uganda
• Tullow sells oil wells to Chinese company
• Tullow Oil to put 80 million shares in company
• Uganda uncertain of tax benefits from Heritage sale

Revenue Sharing and the Balance

• f Power: Sharing What?

• The environmental safeguards

process has been relegated to the back seat – or at least there is no reliable information on the progress

• f the Strategic Environmental

Impact Assessment (SEIA) process.

• A selected review of the

current EIA‟s show that they do not adequately address social and environmental security concerns in the event

• f destruction of the

environment and biodiversity.

Environmental and Livelihood Security & Sustainability

Oil flaring by Shell near Warri in Nigeria

Environmental and Livelihood Security & Sustainability

• Environmental oversight agencies have either taken a back

seat or just adopted a silent posture.

• No specific corporate commitments on environmental

performance deposit bonds or other environmental restoration commitments.

BIG PICTURE SYSTEMIC FAILURES 6 Reasons Why Uganda Could Catch the Dutch Disease

1. Breakdown of Trust in Government

• ---eroded by endemic corruption

1. Breakdown of Trust in Government

• ---eroded by vested interest in land

• 2. Growing Ethnic Nationalism

– increasingly seen as a threat to central authority

The Twelve Indicators Used by the Failed States Index Social Indicators I-1. Mounting Demographic Pressures I-2. Massive Movement of Refugees or Internally Displaced Persons creating Complex Humanitarian Emergencies I-3. Legacy of Vengeance-Seeking Group Grievance or Group Paranoia I-4. Chronic and Sustained Human Flight Economic Indicators I-5. Uneven Economic Development along Group Lines I-6. Sharp and/or Severe Economic Decline Political Indicators I-7. Criminalization and/or Delegitimization of the State I-8. Progressive Deterioration of Public Services I-9. Suspension or Arbitrary Application of the Rule of Law and Widespread Violation of Human Rights I-10. Security Apparatus Operates as a "State Within a State" I-11. Rise of Factionalized Elites I-12. Intervention of Other States or External Political Actors

3. The Character of the State of Uganda

 Uganda increasingly

seen as a failing State

4. Eroding Systems of Accountability.

• Inter-institutional accountability and responsibility
• Fusion between executive, legislative and

administrative authority –the Global Fund/CHOGM experience.

• The supply-demand conundrum- civic

incompetent citizenry incapable of providing frontline defense for democracy and good governance.

• A disempowered local government leadership

that laments more than taking responsibility.

5. State incapacity to arrest the trend

• f environmental degradation
• Forest cover has been declining for most of the last

two decades.

• Failure to restore critical wetland ecosystems.
• Widespread land degradation and soil erosion

causing widespread economic and livelihood losses.

• The increasing menace of polythene and polythene

bag materials.

• The State and state agencies acting more as agents
• f industry.

• 6. Regime Survival Politics
• Public policy and decision-making in

the petro-political era will increasing be defined by regime survival politics.

“Iran’s President denies the holocaust, Hugo Chaves tells Western leaders to go to hell, and Vladimir Putin is cracking the

• whip. Why? They know that the price of
• il and the pace of freedom always

move in opposite directions. It’s the First Law of Petropolitics, and it may be the axiom to explain our age.”

Thomas L. Friedmand, The First Law of Petropolitics.