Uganda’s Oil & Gas Sectoral Linkages an Opportunity to Diversify the Economy -Experts
The oil and gas sector presents immense opportunities for Uganda’s economic growth and transformation. Realising these opportunities requires a concerted effort to ensure that the benefits are maximised and shared equitably across all segments of society.
Prof. Pamela K. Mbabazi, the Executive Chair of, the National Planning Authority (NPA) made this observation during the 1st Sectoral Linkages Conference in Kampala, Uganda, organised by the Petroleum Authority of Uganda (PAU), on 11th-12th April 2024. The goal of the conference was to promote investment in the opportunities arising from the linkages between the oil and gas sector and other economic sectors. Some of the linkages were identified during PAU-commission research studies on the Health, Tourism, Agriculture, and Finance sectors.
Prof. Mbabazi called on other ministries, departments and agencies to carry out research studies on the opportunities their areas of work present, noting that this is how all areas of Uganda’s economy can grow at the same rate.
The NPA also recognised the potential of these sectoral linkages to contribute to the achievement of the goals in Uganda’s fourth National Development Plan (NDP IV), which is supposed to come into effect in the next financial year, 2024/25.
“This contribution includes directly financing capital investments, human capital through skilling, supporting the private sector by creating jobs, building and maintaining infrastructural development, and ensuring that the oil resources are well-managed for all Ugandans. all Ugandans.” Professor Mbabazi added.
Uganda’s oil and gas sector is in development following the Final Investment Decision announcement on 1st February 2022. Close to US$ 20 billion is expected to be invested in the sector in the next three tofive years.
“In line with the common saying that if you want to go far, you go with others, the development of Uganda’s oil and gas sector needs to go hand in hand with the other sectors of the economy so that it goes far, especially in achieving the desired goal of using the country’s oil and gas resources to create lasting value for society,” Mr Ernest Rubondo, the Executive Director said.
The Permanent Secretary, Ministry of Energy and Mineral Development, Ms Irene Bateebe stressed that these sectoral linkages would indeed contribute to the diversification of the economy. They would also ensure that the infrastructure set up for the oil and gas projects is sustained over the long term during the decline of activities in the oil and gas sector.
“Several countries including the UAE and Norway among others leveraged the oil and gas sector to develop their other sectors,” she noted.
In her keynote speech, Dr Valerie Marcel, Executive Director & founder of New Producers for Sustainable Energy shared some of the risks and opportunities from other countries such as Ghana, Guyana, and Ecuador. She noted the risks relating to starting development in a sector as the world exerts pressure on new oil and gas producers not to produce. These risks have mainly arisen from growing conversations on energy transition and climate change.
She stressed that despite these risks, the opportunities for new oil and gas producers to develop their economies while learning from the mistakes of older producers are great. It is therefore important to create linkages between the oil and gas sector and other sectors of the economy to maximise and ensure broad-based economic growth and development.
Sectoral linkages opportunities
Oil andgas industry developments coupled with the Albertine region’s strategic location sharing borders with Rwanda, the Democratic Republic of Congo and South Sudan present indirect effects on the non-oil Gross Domestic Product (GDP). This is through the creation of linkages with other sectors of the economy including agriculture, education, land use planning, housing, health, transport, banking and financial services, ICT, and tourism among others.
Developing and exploiting the linkages between the oil and gas sector and other sectors of the economy is therefore key for broad-based economic growth and development expected to be derived from the sector.The Petroleum Authority of Uganda has taken different steps to identify these linkages and how they can be harnessed.
The place of these linkages in economic development
“The first baby steps include bringing together industry captains for a conversation, and benchmarking with countries such as Ghana, Nigeria, Canada and Norway, which have been producing oil. This benchmarking revealed that we can benefit from backward and forward linkages such as education, health, agriculture, and land use planning, among others,” Mr Ali Ssekatawa said while speaking about how Uganda can leverage the opportunities in the oil and gas sector. He added that the PAUcommissioned research studies to identify the opportunities sectoral linkages present, thanking the private and public sector partners who participated in these studies. He stressed that taking these findings forward will require a proper structure because they cut across several issues such as budgeting, national planning, and programming.
“Uganda has all the ingredients to succeed,” Mr Gunnar Sjøgren, the Project Director International Cooperation, Norwegian Offshore Directorate remarked during the conference. This is because responsible bodies such as the Energy Ministry and the PAU have taken steps to learn from the mistakes of other oil producers and put measures in place to avoid them.
“Wehave a team of scientists, economists and so on who are tasked with finding local solutions to risks such as the ‘Dutch disease’ and ‘oil curse,” Mr Ssekatawa said concerning how Uganda is addressing the risks and challenges identified from old oil producers as it exploits its oil and gas.
The development of the facilities to produce the discovered oil and gas resources in the Tilenga and Kingfisher projects will require about US$ 6 – 8 billion. The commercialisation infrastructure; including the refinery at Kabaale, Hoima at a cost of about US$ 4 billion and a crude oil export pipeline from Hoima, Kabaale to Tanga estimated to cost US$ 5 billion. In addition, the attendant infrastructure including Uganda’s second international airport at Kabaale, a network of 12 tarmac roads and the Kabaale Industrial Park is also underway.
The oil and gas sector therefore presents an opportunity to diversify Uganda’s economy by creating last value in terms of ensuring participation of Ugandans not just in all sectors linked to oil and gas.
Additional Information
The development of Uganda’s oil and gas industry presents the following linkages with other sectors of Uganda’s economy include:
- Fiscal linkages which include direct payments to government through the agreed fiscal regimes.
- Backward linkages pertain to the goods and services inputs that the Extractive Industry requires to operate, including agricultural foodstuffs, housing facilities, and health care services among others.
- Forward linkages encompass the industries and products resulting from the beneficiation of extracted commodities through refining and further downstream processing, such as the production of Liquid Petroleum Gas (LPG) and petroleum products among others.
- Lateral linkages involve the development of new industries using the capabilities obtained through the Extractive Industry supply chain, such as the production of fertilisers from refinery by-products.
- Consumption linkages are characterized by the increased demand for goods and services, like food and accommodation, resulting from higher earnings in the Extractive Industry sector.
- Spatial (infrastructure) linkages refer to the benefits associated with the infrastructure developed for an Extractive Industry project that also serves other sectors of the economy, such as airports supporting exports of agricultural produce and tourism, and oil roads facilitating access to regional attractions and local markets.
The Petroleum Authority of Uganda (PAU), the agency mandated to monitor and regulate the exploration, development and production, together with the refining, gas conversion, transportation and storage of petroleum in Uganda has carried out studies to identify the investment opportunities the oil and gas sector presents for other sectors of Uganda’s economy such as Health, Tourism, Finance, and Agriculture.