Transcript CRITICAL REFLECTIONS ON OIL GOVERNANCE

CRITICAL REFLECTIONS ON OIL
GOVERNANCE DISCOURSE IN UGANDA
Responsibility, Accountability and
Security
Godber Tumushabe
Executive Director/Policy Analyst
Advocates Coalition for Development and Environment (ACODE)
www.acode-u.org
High Level Policy Dialogue on Oil Governance and Biodiversity
Conservation in Uganda
Kampala: February 22, 2010
Structure of the presentation
Theoretical Underpinning of the presentation
o Consensus issues in the current oil discourse
o Outstanding concerns of public interest
oResponsibility
oAccountability and transparency
oRevenue sharing and balance of power
oEnvironmental security and sustainability
oThe BIG PICTURE SYSTEMIC FAILURES- failures
militate against responsible exploitation of oil.
o Building a new partnership between government
and citizens on oil governance.
o
Key Elements of governance Critical
for Oil Governance
State Capacity – related to a states’ power and
ability to enforce rules that are consistent and
predictable.
o Rule of law – that establishes among other
things property rights and limits the states’
discretion in manipulating those rules.
o Democratic institutions – that further limit
exercise of state discretion by holding
governments accountable to their citizens.
o An active citizenry - devoid of fear and
manipulation that acts as front line defenders of
democracy [modified from Francis Fukuyama]
o
Causes of Governance Failures
Bad Laws
Low Public Sector
Capacity
Political Market Imperfections
Uninformed Political
Citizenry
Credibility
Polarization
Consensus Issues on Oil
Governance in Uganda
o Oil
discovery is
a tremendous
economic
opportunity 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
o
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
oil.
 In this debate, it is
only GoU officials
who believe that they
are more than
transparent!

“Be transparent on
oil exploitation” –
New Visio 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
of responsibility and accountability.
 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.
[Best illustrated by the CHOGM Case]

Transparency and Access to
Information
o Contestation
over the disclosure of PSAs –
disclosure the key pre-condition to
mobilizing citizens and CSOs around a
common national objective
o Failure to conclude subscription to the
Extractive Industries Transparency Initiative
– in spite of the policy commitment
(objective 6 of the policy).
o Access to drilling sites by environmental
inspectors and relevant legislators.
GoU-Corporate blackout
conspiracy!
o Government of Uganda:-
o
o
confidentiality clauses
militate against release of
the PSAs.
Oil Companies:- we can
release the agreements if
only GoU consented?
The big brother
syndrome- Government
knows what is best for
you!
Media Frenzy in the Face of State-Corporate Conspiracy of Silence

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,� ...
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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
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
only 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.

Revenue Sharing and the Balance
of Power: Sharing What?
o
o
o
o
o
o
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
Environmental and Livelihood
Security & Sustainability
o
o
The environmental safeguards
process has been relegated to
the back seat – or at least
there is no reliable
information on the progress
of 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
of destruction of the
environment and biodiversity.
Environmental and Livelihood
Security & Sustainability
o
o
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.
Oil flaring by Shell near Warri in Nigeria
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
3.
The Character of the State of Uganda

Uganda increasingly
seen as a failing State
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
4.
o
Eroding Systems of
Accountability.
Inter-institutional accountability and responsibility
oFusion between executive, legislative and
administrative authority –the Global
Fund/CHOGM experience.
oThe supply-demand conundrum- civic
incompetent citizenry incapable of providing
frontline defense for democracy and good
governance.
oA disempowered local government leadership
that laments more than taking responsibility.
5.
o
o
o
o
o
State incapacity to arrest the trend
of 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
of industry.
6. Regime Survival Politics
o 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
oil 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.
Building State-Citizen Partnership
on Oil Governance
o Responsible
exploitation of oil resources
is only possible when there is partnership
between State agencies and citizens’
institutions.
o Citizens’ voices are expressed through
civic organizations such as NGOs,
independent think tanks, religious groups,
traditional institutions, etc.
Building State-Citizen Partnership
on Oil Governance
o
o
GoU Uganda can change the current discourse on oil by
becoming more transparent in its dealings with oil
companies.
Government simply needs to provide more information
including:
o releasing the PSAs, ensuring proper and timely conduct of SEIA;
o addressing issues of revenue sharing;
o moving expeditiously and transparently on enacting appropriate
legislation.
o
Perceptions of conspiracy between state agencies and
the oil companies is a breeding ground for a potential oil
curse.