Unearthing Uganda’s Energy Potential – Aired August 2010
Located at the heart of central and east Africa, Uganda is situated in a region that includes some of Africa’s most economically important countries. With a key position in this strategic location, Uganda today has great potential to become the key investment and business hub in the east African region.
Uganda has consistently attracted people from all over the world. Apart from its open, friendly and hospitable population, other attractions include security, great weather and a history of religious tolerance.
Though landlocked and much smaller than its neighbors, Uganda is well on its way to becoming a regional hub as it borders powerhouses like Congo, Kenya, Tanzania, as well as Rwanda. In addition, all goods going to southern Sudan pass through Uganda, poising it to become a ready hub as borders go down and markets build up in future.
The country today offers a number of advantages for interested investors – at top of the list is an open market economy that allows free repatriation of profits. One of the most economically liberal countries in Africa, a 2003 survey conducted by national agencies indicated that the government’s economic policies had successfully led to a growth in private sector enterprises and investments over the years. In 2006, the country enjoyed a 5% growth rate, and potential investment opportunities in the country are unlimited. Currently, the government is keen to promote private-sector diversification in all industries.
The country’s current developing economy is the result of one man’s vision – His Excellency President Yoweri Kaguta Museveni. In power since 1986, he has been lauded by the West as part of a new generation of African leaders.
The country is a member of several regional organisations, including the East African Cooperation and the Common Market for Eastern and Southern African States (COMESA). These agreements, together with many other advantages, make Uganda a very attractive investment destination
The country today also has one of the fastest growing populations in the world. Nearly half the population is under 16, and one of the challenges currently facing the country is that of providing gainful employment to its population. It is hoped that future investments into the country would help stave what could potentially be a massive brain drain.
While Uganda is already a major energy producer in East Africa thanks to its hydropower stations, it is still attempting to become self-sufficient in the energy sector. The third largest economy in East Africa, Uganda struck commercial hydrocarbon deposits in the Lake Albert Basin and reserves in 2006. With estimates at 2 billion barrels, there has been a surge in foreign investor interest in the budding petroleum sector. The government’s decision to expedite creation of domestic petroleum capacity further fuels investor interest in the country.
But the government is determined to manage its energy sector in a responsible way
The government looks at these new discoveries as an opportunity to generate more jobs, and provide training for Ugandan people.
International energy producers are competing for assets in Africa as traditional fields go into decline, and nations from Venezuela to Russia curb access to their resources. And on the African continent, Uganda is viewed as an attractive zone.
Four international oil exploration companies have been granted Product Sharing Agreements in the country, and are already on the ground in Uganda where 800 million barrels of oil have been confirmed, with an estimated total value of $50 billion.
Prospecting has started in or near Uganda’s Western Rift Valley where surface oil seeps have occurred. In June 2006 discoveries at three fields were announced which have combined reserves of 100 to 300 million barrels. This is a significant find, but modest compared to the known reserves of Nigeria and Angola. 30 million barrels are ready for extraction this year, which would result in an estimated 12,000 barrels a day. The building of a refinery to provide some national capacity to process the extracted oil is also under way.
Tullow Oil, by far the largest oil company in Uganda, refers to the country as the “jewel” in Tullow’s crown. Tullow owns half of blocks 1 and 3A in Uganda and also owns block 2 outright.
In a recent development, the company has begun looking into supplying crude oil to power plants in Uganda in a few months – a move the government hopes will help cut power tariffs, as well as minimise crude and gas flaring in oil fields so as to limit the environmental impact of petroleum exploration and production activity.
The oil production prospect is attracting a broader international investors’ interest.
One of the potential partners of Tullow in the Product Sharing Agreement is TOTAL.
In addition, China, the world’s second-largest energy consumer, is seeking assets in Africa to secure fuel for its booming economy. The Chinese National Offshore Oil Company is thus another strong player in the exploration or “upstream” process.
Other oil companies in the country include Neptune petroleum, and Dominion. One of the challenges the companies are facing is managing the expectations of the people, since oil is new to Uganda,
Another important area for both the government and the private sector companies are CSR projects or what they can give back to the society in the area they are operating in.
“Downstream” is where the various energy products reach customers, and these include petrol stations who are in a good position to partner with foreign investors coming in to the country. In 2008, it was estimated that Uganda consumed about 13,000 barrels of oil a day, and spent 400 US dollars annually on petroleum imports.
Uganda imports all its petroleum products – there is currently no production in the country, but local production is expected to begin soon. Imports come directly through Kenya and Tanzania via trucks.
Consumption, largely based in transportation, rose rapidly in the 1990s; rising by an average of 14% per year from 1993 to 1996, and at about 6% per year since 1997. The rapid rise in consumption is reflected in the growing number of vehicles in the country. Along with other parts of the Ugandan economy, the petroleum industry was privatised and liberalised in the 1990s which resulted in a sharp increase in prices and investment.
Another area of the energy sector that is drawing much foreign interest is that of the provision of reliable electricity, which is a key component to building a stable business environment in the country. Much of the hydroelectric potential of the country is still untapped. Recent discoveries and projects in different energy sectors have sparked the interest of many foreign investors from all over the globe.
One example of a major project in Uganda that is coming to fruition is the construction of a $750 million dam at Bujagali falls on the Nile river – the Bugagali Hydropower Dam in Jinga/Bugagali, about 80 kilometres from Kampala. Following 10 years of study and planning, the project is being assisted by the World Bank. It is a multinational hydro-power project, and is the biggest investment in sub-Saharan Africa. The dam will help supply more electricity to the regions, which currently have only 15% of penetration.
Uganda expects its electricity supply to grow by about 8% thanks to such hydro power stations.
Covering nearly 300,000 square kilometres, Uganda offers ample fertile land, regular rainfall and mineral deposits – all excellent and favorable conditions for a flourishing agrarian economy. Contributing nearly 40% to the country’s GDP, the agrarian economy in Uganda employs 80% of the labour force, and makes up 90% of export earnings, with nearly one-third of the country’s rich red soil under cultivation.
Agro-processing is a major opportunity for investment as it adds value to local produce through the canning and manufacturing process, making it even more suitable for export given its long shelf-life. And with licenses being granted to private exporters, there is indeed much interest in this field.
The massive sugar industries on 1960s are reviving, along with the large tea estates that have been neglected for a long time. Previously strict government controls on the coffee and cotton industry have been loosened, allowing farmers a wider choice of markets.
Livestock production in Uganda is another area in the agricultural sector that has continued to grow at a rate of nearly 5% yearly – a response to the increasing demand for milk and meat in the local market. In addition, with nearly 20% of its surface area covered by lakes, rivers and swamps, the country has a potential fish production of over 275,000 tons annually. Currently employing some 500,000 Ugandans, the industry offers great opportunities for well-organised and comprehensive investment.
Here is Asia Business Channel’s top 5 of the tourist activities you can’t possibly miss.
At number 5 we picked a relaxing boat ride on one of the many lakes in Uganda. Enjoy the various views of beaches, river mouths, forests, villages and wild life both on the water and on the shores.
Spectacular bunjee jumping above the river Nile is at number 4. Not only a challenge for daredevils, but also for those who want to experience the thrill of this extreme sport and the wonderful panorama before and during the jump.
Enjoy animal spotting in a beautiful nature setting. A visit to one of the many national parks makes it to number 3.
At number 2 is white water rafting on the river Nile. The really adventurous can enjoy up to class 5 rapids. Not for the faint-hearted.
And what is the top tourism attraction? Gorilla tracking. Experience an eye to eye meeting with our closest relatives in their natural habitat. You will never forget it.
Tourism is one of the most sensitive and difficult industries to develop, and with a spotted history like Uganda’s, success in the tourism industry was anything but instantaneous. However, the recently redeveloped infrastructure, thanks in part to the burgeoning energy sector and influx of foreign investors, is now having a knock-on effect on the tourism industry as the country is fast emerging as a premier tourist destination in Africa.
Tourism in Uganda today is an important generator of foreign exchange, high-end employment, and investment. There has been increased investment in tourism, particularly in travel accommodation and related facilities. This has enhanced tourists’ experiences of the country.
Uganda is one of the most beautiful countries in Africa, with fantastic natural scenery. Due to this, most of the tourism opportunities in Uganda are focused on its diverse landscape and wildlife. Fondly referred to as “the Pearl of Africa”, Uganda offers nature lovers unspoiled scenic beauty from wide East African plains and expansive savannah grasslands, to rain forests and snow peaked mountains.
The country can be marketed as a new destination with tailor-made packages that are different from the mass tourism that other African countries have been offering. With its rich eco-tourism potential, Uganda is the ideal choice for tour operators targeting niche market areas such as bird watching, observing the gorillas and mountain trekking.
Visitors will find some of the region’s more peaceful national parks, home to half of the world’s remaining mountain gorilla population and a wide variety of bird species and wild range. One of the so far less known touristic places in Uganda is the Budongo forest. It is one of the largest tropical forests in east Africa.. It has the highest concentration of chimpanzees in Uganda and in the region and it is one of the best places to see chimps on the African continent.
The country offers an exceptional opportunity for business in the heart of Africa. With a government keen on developing the economy to its full potential, interested investors can rest assured that they will receive all the support they need to ensure that their ventures into this East African country will be fruitful.