Continued from Part 1
Brian, (whom I am tremendously grateful to) had the following to say about the on goings:
There are conflicting reports on how much oil Uganda has. They range from 400 million to potentially 2 billion barrels. How much oil is there? How much is actually recoverable?
The most consistent quotation has been 700 million barrels of recoverable reserves as quoted by the Business Unit Manager of Tullow Uganda Ltd, Wood Mackenzie and PFC. Much larger amounts have been quoted in various publications up to 2 billion barrels which should be taken with a pinch of salt. Hydrocarbon estimation is riddled with tremendous amounts of uncertainty and people often confuse total amount of oil in the reservoir with what is recoverable. Until more appraisal wells are drilled to better understand the ‘Oil in Place’ and recovery factors, then we will still have a large number of figures being bandied about. Nevertheless, what is certain is that Uganda has oil reserves of sufficient quantity that are commercially viable.
President Museveni has been quoted saying, “Africa is capable of protecting its resources from any exploitation by foreign countries.” What's your take?
Depends on his definition of 'protection' - if by protection he means maximizing the value of that natural resource to Africans, then I agree. The challenge is to ensure and enforce good systems of governance, fair trade agreements, and most importantly checks and balances to ensure distribution of the value from these resources to the citizens of the resource holding country and avoid corruption as much as reasonably possible; which is not so easy.
If by protection he means that the natural resources should only be developed, manufactured and used locally , then in many respects that would be trade protectionist and would not utilize the full value chain of the resources. In reference to oil, the resource is useless unless it can be accessed by the global market. Either through arbitrage in the selling and trading of crude, or, through refining for retail users and as a basis for chemical feed stocks.
On the issues of the pacts with the oil companies, and revenue sharing: Reuben Kashambuzi the commissioner for petroleum exploration and production in 2008 was quoted by New Vision Uganda as saying,
"Unfortunately, we have been prevented from giving you that document because it has been classified as confidential.”
What is the best revenue sharing method between oil companies, and governments?
Traditionally, production sharing contracts and agreements have been the mechanism used in many countries to split value between the resource holder (most likely the Government through its National Oil Company) and the International Oil Company. In general terms, these agreements allow the Exploration and Production (EP) company to recover its investment and capital expenditures by taking a portion of each barrel or dollar equivalent cost with the rest of the barrel then subject to being shared between the resource holder and the producing company.
Revenues generated by the producing company are then subject to various royalties and taxes which vary depending on the fiscal regime of the country in question. The optimal agreement is one which ensures equilibrium between the government take whilst ensuring sufficient post tax profits that provide an incentive for the EP company to continue producing in the long term. Governments can encourage more production by also offering tax relief on new capital expenditure and uplifts for producing from difficult reservoirs so as to incentivize the EP companies. Off course, all contracts should be renegotiable to adjust for market effects such as falling oil prices, and recessions in the global economy that affect demand such as we have experienced in the last year.
Nigeria, Sudan, Equatorial Guinea. The reality is, where there is oil in Sub Saharan Africa, there is probably civil unrest. In Uganda, the Bunyoro Kingdom have stated previously that they want up to a 50% share of the oil reserves. Can Uganda break the oil curse?
That is the million dollar question!
What is the root cause of the civil unrest in all these areas? Uganda definitely has some of the characteristics - corruption, military maneuvering, institutions making unrealistic demands, lack of public awareness,... but the main solutions or at least mitigation of these issues will have to be transparency, strong policy and regulation, and continuous inspection. all arguments are null and void if a country is politically/economically unstable.
If you look at the oil producing companies of Africa, only two currently stand out as scoring a decent grade: Angola and Libya where all things considered, the countries have been stable in the past 5 years. Gabon too but with the demise of Omar Bongo, who knows what will transpire? The same can not be said of other African hydrocarbon rich countries. Ghana deserves special mention as it is on the cusp of becoming a major producer with the Jubilee Field going on-stream and more offshore potential. Currently seen as the leading light on African democracy, it will be interesting to see how oil revenues will be utilized.
The jury on Uganda, in my opinion is still out......
There are two opposing schools of thought on infrastructure. Should Uganda build a refinery or not?
Yes - to supply local demand. By local, I mean, Ugandan, Rwanda, Burundi, southern Sudan Kenya, Tanzania and eastern Congo.
However, even with all those considered, there will still be a surplus supply of crude oil which Uganda will eventually export, starting with tankers and rail and eventually based on reserves and potential future exploration a dedicated export pipeline.
President Museveni has also stated that Uganda will not export any crude. The East African market is big enough to sustain demand. Is this feasible?
Definitely not feasible given the quotes of expected peak production with the current estimation of reserves.
Peak production: 150,000 barrels/day
Most optimistic model of refinery: approximately 80,000 blue barrels /day (6% GDP growth over 25 yrs and at 90% utilization of refinery which would be 1st quartile operations)
I will continue to try and have a running commentary as the industry activities pick up.
The African Accent
Why lie, life without a cell phone is hard. So, I started shopping again. This time, I am determined not to sign up to the usual Canadian phone companies that charge ridiculous cell phone rates. Last week, I stumbled on the best deal I have ever seen.
So far, other than the request to remove specific names from my post, I have not been summoned to the docket. I will be sure to keep you guys posted on any new developments that come to my attention.
Turns out that Uganda did not sell itself short after all. 
convince you that I disconnected my phone as an experiment. Although I must admit it was terribly convenient to do so, considering the state of affairs in my current account. After almost a year without a cell phone, this is what I have learned:
over my toilet seat, I don’t know (I thought this was an exclusive guy thing). She didn’t even wipe the droplets … chemical spill (and it was a lot). I have tried to justify it as an accident, but who am I kidding? I am almost certain it was on purpose. 
Thank you, thank you! In fact, yours was the first blog I read. And also for the comments; especially in the beginning when I was kidogo reluctant to reply. Your page has gone to inspire a lot, including the ‘LinkWithin’ gadget that 
They all look at me, shocked, as if I have stripped naked. Then Stan finally rules, "We are arguing like men ... now you want to tell us about some woman in your head. We can not accept that argument!"
