Tullow may face tough choices dealing with the regime in Uganda, writes NICK WADHAMSin Kampala
IN TULLOW Oil's Uganda headquarters, there hangs a small framed map of the company's oil-prospecting blocks in the country. It is a gift from president Yoweri Museveni, who autographed it and, with a flourish, wrote the Swahili word for dung fly – zindangire– next to his signature.
When he presented the map to Tullow’s Uganda manager Brian Glover, Museveni warned the company to watch out for people who demand bribes in notoriously corrupt Uganda. The president calls them dung flies.
“That’s why that picture is on my wall – because he’s the one telling me this is the way we’re going to do it,” Glover said in an interview. “Transparency should win the day.”
So one would hope. Tullow, listed on the London and Dublin stock exchanges, is one of two lead oil exploration companies that have found at least 800 million barrels of oil in Uganda’s west, in protected wildlife areas near Lake Albert. That discovery thrust a poor country known mostly for its struggle to fight HIV/Aids into the role of a potential economic powerhouse in east Africa.
With the prospect of great wealth, however, has come the fear that Museveni and his allies will fall victim to the so-called oil curse, by which new found resources such as oil or gold impoverish underdeveloped countries even more. That has put Tullow in an awkward position.
Tullow argues that it is reversing the trend set by foreign companies elsewhere in Africa, which are known to collude with corrupt regimes, offering kickbacks and favours, in exchange for massive profits.
“We and our process will stand up to any and every scrutiny,” said Tim O’Hanlon, Tullow’s vice-president for African business. “That’s what we pride ourselves in. It sometimes makes life very, very difficult for us in Tullow Oil.
“I propose it’s a lot more challenging to do business here, but it’s a lot more interesting and we sleep very well at night.” Tullow, founded by former accountant Aidan Heavey, earns 69 per cent of its revenue from Africa, much of it by working with regimes with abysmal records, including Equatorial Guinea and Angola. But it also portrays itself as environmentally cautious and socially responsible. In Uganda, Tullow spent about $1 million on corporate social responsibility projects in 2009. It built a health clinic, drilled boreholes and even teaches people how to swim so that the frequent ferry accidents on Lake Albert don’t take so many lives.
Sceptics of Uganda’s government fear that Tullow’s good intentions cannot co-exist with the dirty task of extracting oil. And, human rights activists fear that Tullow’s do-good message may ultimately be irrelevant if the government itself is not committed to openness or environmental safety.
The president’s critics argue that he has solidified his grip on power by dubious means. His family and allies possess enormous economic influence in Uganda. He abolished term limits in 2005. Since he took control in 1986, Uganda has become one of the most corrupt countries on the planet, according to Transparency International.
Opposition leaders argue that oil money will help alleviate pressure from donor countries, which now contribute about 40 per cent of Uganda’s budget. At peak capacity, Uganda will likely produce 150,000 barrels of oil a day, and earn the country $2 billion a year.
“What oil can achieve today is to give the government the freedom to operate without the encumbrances imposed by donor countries,” said opposition leader Kizza Besigye. “It would take the democratisation process miles back from where we have reached.”
The government insists that Uganda's oil profit will not simply vanish. However, the most public battle over Uganda's oil future is being waged by two young journalists with the independent Daily Monitornewspaper who filed a lawsuit in 2007 asking the government to release the production-sharing agreements it signed with the oil companies.
The PSAs dictate, among other things, how oil profits will be split between companies and the government.
The government insists it got a good deal with the contracts and that disclosing them would cripple its competitive advantage when it negotiates new contracts.
Tullow says it would happily release the agreements if the government allowed. Transparency advocates argue that the agreements are not nearly so advantageous to Uganda as the government claims.
