EACOP’s maximum capacity will be 246,000 barrels/day, and 62% of revenue from the export of this volume will be raked in by the French firm TotalEnergies, raising the question of who should benefit from Africa’s resources.
The Pipe Vision of a Project
Should Uganda’s crude be used to create wealth, or be surrendered to Neocolonialism?
In a now viral statement, the long-serving Ugandan president wondered why African leaders failed to organize defenses after they heard that the Portuguese raided the African coastal city-states in the 15th century, such that they were caught unprepared by the British and German colonizers in the late 19th century. Could the same leader and others be repeating the mistakes of their predecessors by avoiding industrialization and building wealthy states that can resist Western neocolonialism? The thought that the Ugandan government posed like it could not raise $4 billion for building a large oil refinery and relinquished 62% of crude export revenue through EACOP, through which TotalEnergies is expected to rraise a $5 billion investment, is puzzling. By Uganda opting for EACOP and a small refinery in Loima, it is likely to remain unindustrialized and without generating long-term wealth from its crude oil.
Previously, this author found out that Western countries, for example, Canada and Norway, had retained majority control of over 60% of their oil resources through state-owned companies, and managed to earn the bulk of the revenue from their oil, an opportunity the Ugandan government gave away for unexplained reasons. Similarly, these countries receive further revenues through taxes/royalties, an avenue that the Ugandan leadership has partially or completely ignored. To balance the past review, this peace proceeded to conduct an analysis of selected eastern countries such as Malaysia, Indonesia, and India and found out that these their governments maximize incomes from their petroleum resources from three levels: retaining a large stake in extraction through National Oil Companies, charging taxes/royalties, and participating in value addition. These governments end up accumulating vast wealth used to provide social services and fiscal safeguards, as described below.
Successful Cases of Sovereign Resource Development
Malaysia, a small Asian country that endured brutal British colonialism, has adopted a different path for managing its crude oil resources by implementing state ownership and management of oil resources. The federal government gave Petronas, a state-owned company, exclusive rights for oil exploration and extraction across the country. Unlike Uganda, the state controls 100% of crude oil extraction and hence revenues. Petronas remits dividends from oil sales, which, when added to taxes and transfers, translate to tens of billions in local currency every year, which the state channels to sovereign-based investment vehicles, social investments, infrastructure development, and provision of services. Therefore, Malaysia captures much of the value of its resources, while Uganda can only hope to gain 15%.
Like Malaysia, Indonesia has a state-owned oil company, Pertamina, that explores for and extracts its oil reserves in the interest of the country. Pertamina was established in 1957 and gained control of Indonesia’s natural resources, which were previously exploited in the interest of The Dutch colonialists since 1885. Later, the country allowed foreign companies to participate in the extraction and sale of oil resources under production sharing contracts, but the state retained dominant control of the oil output and revenues. To date, the state takes about 60% of the proceeds of petroleum through profit sharing, taxes/royalties. These proceeds, which are directly paid to the treasury, are used to offer subsidies for domestic energy consumption and to promote industrial development, benefits that Uganda will lose.
India, too, has retained majority state ownership of its oil and natural gas resources through state-owned firms such as Oil India Limited (OIL) and Oil and Natural Gas Corporation (ONGC). Foreign firms participating in oil production in the country are legally bound by strict revenue-sharing regimes, with the government having significant control over the sharing formula. For instance, the new policy dubbed Hydrocarbon Exploration & Licensing Policy (HELP) binds foreign companies to share revenues with the government. Firms bidding to explore and extract crude oil in India are required to quote the percentage of revenue they plan to share with the government, which allows the government to choose the best offer in a competitive process, as opposed to the Ugandan government, which took a minimal shareholding of its crude without subjecting TotalEnergies to any competitive bidding. Also, the Indian Government receives taxes/royalties based on the value of each wellhead and the ease of extraction. For instance, a model production sharing contract provides that companies producing oil in the country pay in the following percentages: 12.5 % for onshore crude, 10% for offshore, and 5% for the first 5-7 years for offshore resources exceeding 400 meters in depth, while the Ugandan government has strangely declined to take royalty from oil extraction and export.
Rewriting the African Story
The three Asian countries reviewed have a history close to Uganda’s in terms of having been subjected to Violent Western European colonialism, but have proceeded to regain control of their resources to achieve development, something that countries in Africa, including Uganda, can attempt. Granted, some governments that asserted sovereignty and used their resources to better their populations, such as in Iraq and Libya, were destroyed by the US and Western Europe under false pretexts; others, for instance, in the Sahel, have attempted to continue trying their best to wrestle their resources from Western plunder, which may lead to positive results. The fight for freedom and the right to development continues unfolding where some countries in the Sahel peeled off another layer of France colonial exploitation, a trend that should be emulated. The three Asian countries mentioned earlier have successfully regained control of their resources for decades and attained considerable development, proving that resource sovereignty is possible. Therefore, all forms of colonial control and exploitation should be fought and defeated by formerly colonized countries by declining to join any unequal agreements.
Simon Chege Ndiritu, is a political observer and research analyst from Africa
Follow new articles on our Telegram channel
