TOUGH CHOICES
In January this year at the launch of the oil drilling operations at the King Fisher oil fields in Kikuube district, President Yoweri Museveni recalled an altercation with TotalEnergies. That time, the 79-year-old said, TotalEnergies wanted to build only the oil-heated pipeline, known as the East African Crude Oil Pipeline (EACOP) that would transport Uganda’s thick waxy oil to Tanga port for export to foreign markets but President Museveni blatantly refused.
“I asked my Total friends: Where are you taking my [oil]?” said President Museveni, who has ruled Uganda for the last three decades. “‘Pipeline for what? Here, in East Africa, we have got energy needs’. Why do you build a refinery and we supply ourselves’. They wanted to build the oil pipeline and make money quickly. I said no ‘that will never happen in Uganda when I am here’”.
At the recent COP28 climate summit in Dubai , following hard-fought negotiations representatives from nearly 200 countries agreed to begin reducing global consumption of fossil fuels, something scientists say is the last best hope to combat climate crises.
National oil companies (NOCs) from emerging markets produce about 50 percent of the world’s oil, hold about 50 percent of global refining capacity, and own most of the world’s oil and gas reserves, experts at the COP28.
But as calls for moving away from dirty fossil fuel ramp up, experts are urging NOCs to shift away their business models tailored to cleaner energy projects or risk turning their energy projects into stranded assets.
“NOCs have a lot to improve like other oil companies which are energy intensive otherwise they at risk of becoming stranded assets” Natalie Jones, Policy Advisor at International Institute for Sustainable Development (IISD).
“They need to change their business models,” Jones added, urging investors also invest fund energies that have established transition plans to avoid problems in future.
Uganda currently exports all its petroleum products. Last year, according to central bank data, Uganda imported $1.6 billion worth of petroleum products. But the east African, Uganda own 15 percent stake at the EACOP project, hopes to cushion these expenditures by processing its own oil for domestic use and in the region upon completing 1,443 km oil pipeline by 2025. Its oil refinery, located in Kabaale in Hoima District, is expected to produce 60,000 barrels of oil per day upon being completion in 2027.
Peter Muliisa, the Uganda National Oil Company (UNOC) chief legal and corporate affairs officer, s the EACOP is ‘one that is necessary for the development “ adding that it create more revenue which will be invested in to renewable energy in future.
“This project will unlock and create more than 32,000 jobs for the majorly youthful populations, the government of Uganda will be enabled to receive more than USD 20 billion in crude oil revenues from the oil wells,” he said.
“the project will enable production of significant tonnes of Liquefied Petroleum Gas (LPG) that is badly needed as substitute for charcoal and reduce loss of forest cover”.
EACOP was planned to transport oil for 30 years, Muliisa noted admitting that “if Uganda doesn’t have news discoveries, we have stranded assets I our midst”.
Stranded assets are assets that have lost value or have become liabilities before the end of their expected economic life. For example, as the world transitions away from high-carbon activities, all technologies and investments that cannot be adapted to low-carbon and zero-emission modes could face stranding.
Ali Sekatawa, the Director of Legal and Corporate Affairs at the Petroleum Authority of Uganda, noted Uganda “ will avoid having stranded assets on it hands” by using revenue generated from oil as a spring board for develop renewable energy projects.
“All we are doing right now is preparing for the future and the time frame is enough for us to prepare a transition,” he said. “To do that, we need money to build renewable projects – and the oil will give us that. But countries in the Global North should start first because they began drilling oil very many years ago”.
During the COP28 climate summit, as Uganda launched its first energy transition plan , Energy Minister Ruth Nankabirwa, noted that EACOP will boost Uganda’s revenue and improve energy security by cutting reliance and associated economic distresses that Uganda has been facing as a land locked country.
“Oil revenue will provide us funds for public infrastructure developments, build technical competencies for other industrial activities, save foreign exchange, and provide revenue for the country’s economic and social development,” she said . “Oil development will also help reduce on unsustainable biomass use by providing more LPG (Liquefied Petroleum Gas) for cooking and help develop a petrochemical industry”.
This story was produced with assistance from MESHA and IDRC Eastern and Southern Africa Office for science journalists reporting on COP28.
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