CRITICAL REFLECTIONS ON OIL CRITICAL REFLECTIONS ON OIL GOVERNANCE DISCOURSE IN GOVERNANCE DISCOURSE IN

UGANDAUGANDA

Responsibility, Accountability Responsibility, Accountability and Security and Security

Godber TumushabeExecutive Director/Policy AnalystAdvocates 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 presentationStructure of the presentation

o Theoretical Underpinning of the presentationo Consensus issues in the current oil discourseo Outstanding concerns of public interestoResponsibilityoAccountability and transparencyoRevenue sharing and balance of poweroEnvironmental security and sustainabilityoThe BIG PICTURE SYSTEMIC FAILURES-

failures militate against responsible exploitation of oil.

o Building a new partnership between government and citizens on oil governance.

Key Elements of governance Key Elements of governance Critical for Oil GovernanceCritical for Oil Governanceo 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]

Causes of Governance Causes of Governance FailuresFailures

Bad Bad LawsLaws

Low Public Low Public Sector CapacitySector Capacity

Political Market Political Market ImperfectionsImperfections

UninformeUninformed d

CitizenryCitizenry

Political Political CredibilitCredibilityy

PolarizatioPolarizationn

Consensus Issues on Oil Consensus Issues on Oil Governance in UgandaGovernance in Uganda

oOil 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 Consensus Issues on Oil Governance in UgandaGovernance in Uganda

o The potential revenue windfall could help the country address major production infrastructural constraints.

Consensus Issues on Oil Consensus Issues on Oil Governance in UgandaGovernance in UgandaGovernment 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 Consensus Issues on Oil Governance in UgandaGovernance in UgandaAnd 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 Outstanding Concerns of Public InterestInterest

Responsibility and AccountabilityResponsibility and AccountabilityThe 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 Transparency and Access to InformationInformation

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 GoU-Corporate blackout conspiracy!conspiracy!

o Government of Uganda:- confidentiality clauses militate against release of the PSAs.

o Oil Companies:- we can release the agreements if only GoU consented?

o The big brother syndrome- Government knows what is best for you!

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,� ...

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 Source: World News Report [Sunday Feb. 21, 2010 at 06:15 hrs]06:15 hrs] http://www.einnews.com/uganda/newsfeed-uganda- http://www.einnews.com/uganda/newsfeed-uganda-oiloil

Media Frenzy in the Face of State-Corporate Conspiracy Media Frenzy in the Face of State-Corporate Conspiracy of Silenceof Silence

Revenue Sharing and Revenue Sharing and Balance of PowerBalance 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.

o Chinese join Tullow, Eni SPA tug of war o Activists drag UK govt to court over aiding Tullow o Eni to invest Shs25 trillion in Uganda o Tullow sells oil wells to Chinese company o Tullow Oil to put 80 million shares in company o Uganda uncertain of tax benefits from Heritage sale

Revenue Sharing and the Revenue Sharing and the Balance of Power: Sharing Balance of Power: Sharing What?What?

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.

o 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 Environmental and Livelihood Security & Livelihood Security &

SustainabilitySustainability

Oil flaring by Shell near Warri in Oil flaring by Shell near Warri in NigeriaNigeria

Environmental and Livelihood Environmental and Livelihood Security & SustainabilitySecurity & Sustainability

o Environmental oversight agencies have either taken a back seat or just adopted a silent posture.

o No specific corporate commitments on environmental performance deposit bonds or other environmental restoration commitments.

BIG PICTURE SYSTEMIC BIG PICTURE SYSTEMIC FAILURESFAILURES

6 Reasons Why Uganda Could 6 Reasons Why Uganda Could Catch the Dutch DiseaseCatch the Dutch Disease

1.1. Breakdown of Trust in Breakdown of Trust in GovernmentGovernment

----eroded by endemic corruption----eroded by endemic corruption

1.1. Breakdown of Trust in Breakdown of Trust in GovernmentGovernment

----eroded by vested interest in ----eroded by vested interest in landland

2.2. Growing Ethnic Growing Ethnic Nationalism – increasingly Nationalism – increasingly

seen as a threat to seen as a threat to central authoritycentral authority

The Twelve Indicators Used by the Failed States Index

Social I ndicators

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 I ndicators

I -5. Uneven Economic Development along Group Lines

I -6. Sharp and/or Severe Economic Decline

Political I ndicators

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

3.3. The Character of the State of The Character of the State of UgandaUganda

Uganda increasingly seen as a failing State

4.4. Eroding Systems of Eroding Systems of Accountability.Accountability.

o Inter-institutional accountability and responsibilityoFusion 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.

5.5. State incapacity to arrest the State incapacity to arrest the trend of environmental trend of environmental

degradationdegradationo Forest cover has been declining for most

of the last two decades.o Failure to restore critical wetland

ecosystems.o Widespread land degradation and soil

erosion causing widespread economic and livelihood losses.

o The increasing menace of polythene and polythene bag materials.

o The State and state agencies acting more as agents of industry.

6.6. Regime Survival PoliticsRegime Survival Politics

oPublic 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 Building State-Citizen Partnership on Oil Partnership on Oil

GovernanceGovernanceo 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 Building State-Citizen Partnership on Oil Partnership on Oil

GovernanceGovernanceo GoU Uganda can change the current discourse on oil by becoming more transparent in its dealings with oil companies.

o 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.