Know more About The East Africa Crude Oil Pipeline project (EACOP), which is meeting resistance from opponents of Uganda’s development

By: Kivumbi Badru

The East Africa Crude Oil Pipeline project (EACOP), which is meeting resistance from opponents of Uganda’s development, is one of the projects Uganda has planned to monetize its oil and gas assets, which are currently valued at US$ 116 billion (gross). These assets are certainly among the country’s biggest economic assets in terms of value.

Some of the strategic reasons for choosing to export about 57% of the crude oil to be produced in the country are to access the international market, enhance the country’s export base and the trade balance which is currently in deficit.

The other project for monetizing the country’s oil and gas assets is the Refinery, with a strategic objective of meeting Uganda’s petroleum products needs that are currently estimated at 36,000 barrels/day and growing at an annual rate of about 7%. This would also save the country foreign exchange expenditure of over US$ 1.23 Billion per year.

Among the main petroleum products expected to be produced under the oil production (Tilenga and Kingfisher) and the refinery projects is Liquified Petroleum Gas (LPG). Production of LPG, which is mainly used in households and would be a key replacement to the use of charcoal and firewood is expected to be produced at a scale of over 300,000 tons per year at peak production. This amount is close to the total amount of LPG currently being consumed in the whole of East Africa.

The life cycle of the above projects is under 30 years, which is far below the target by the most radicle energy transition pledges.

The size of Uganda’s economy as reported by the Ministry of Finance Planning and Economic Development is US $ 45.7 billion, with expected domestic revenue of US $ 6 Billion (13% of GDP) in 2022/23.  The economy is dominated by the services sector at 41.5%, followed by industry at 26.8% and the agriculture sector at 24.1%. The country recorded a trade deficit of US$ 413.80 Million in May 2022. In addition, the country has very high levels of unemployment.

Economies like the United Arab Emirates (UAE) and Norway, among others, were not in a different situation from the above at the start of their oil and gas industry. These economies were able to leverage on their oil and gas resources to achieve economic take off. Uganda’s oil and gas projects can significantly contribute to the country’s economic takeoff, given the fiscal and non-fiscal benefits expected to accrue to the country.

The key drivers include:

The magnitude of the expected investments, estimated at $15 – 20billion, in a space of 3 – 5 years which will triple the country’s Foreign Direct Investments during this period.

Reasonable in-country capacity to ensure a significant share of the investments in form of employment and provision of goods and services is retained in the country.

A fair share for government from the expected oil revenues (close to an average of 70%)

The institutional, regulatory and governance infrastructure to ensure government’s share in the oil revenues is secured and put to good use.

The frameworks for the country’s oil and gas sector now in place together with the activities being implemented make it clear that the oil and gas industry is going to be transformational on Uganda’s economy and in improving the wellbeing of its citizens. It is therefore only rational that this upcoming transformation is welcomed and supported. The benefits are coming in a number of forms; i) revenue from the agreed fiscal regime; ii) the participation of Ugandans and Ugandan Enterprises through employment and provision of goods and services also known as National Content; iii) local social and economic development; iv) sectoral linkages to ensure broad based growth; and v) improved investment rating of the country, among others.