Uganda ready for oil riches amid corruption fears

[February 18, 2012]  WASHINGTON (AP) -- Uganda's government has signed long-delayed licenses that would make it Africa's newest oil-producing nation -- defying court cases, legislators and growing concerns that the new riches will bring more corruption and pollution.

The deal with Anglo-Irish company Tullow Oil lacks transparency, contend critics who do not want to see Uganda go the way of other African countries like Nigeria, Equatorial Guinea and Angola, where a small elite became fabulously wealthy off petroleum while most citizens remained deeply impoverished

Dickens Kamugisha, CEO of the Uganda-based Africa Institute for Energy Governance, complained that the agreements between the government and the oil companies are secret, and so are environmental and feasibility studies.

Uganda's High Court is to hear a petition March 5, filed by Kampala lawyer Hamada Mulumba as a concerned citizen in December, asking the court to temporarily halt the government from signing any oil deals. But earlier this month, after more than a year of acrimonious negotiations, the government signed two licenses with London-based Tullow Oil.

The agreements, worth $2.9 billion, allow Tullow to sell two-thirds of its Uganda interests to China's CNOOC Ltd. and France's Total. Tullow agreed the oil would be refined in Uganda and not exported as crude.

Ugandan legislators resolved three months ago that all oil contracts should be suspended until Parliament puts in place laws and institutions to ensure transparency in the industry. Still, the deal with Tullow Oil was inked.

Government spokesman Fred Opolot said the government "is not bound by parliamentary resolutions, which are advisory."

A spokeswoman for Tullow Oil, Kate Lehane, said the government of Uganda decided the timing of the deal.

"Tullow is dealing with the government of Uganda and the executive," she said. "Tullow remain very keen to talk to Parliament."

Kamugisha said civil society organizations are threatening to work with international partners to blacklist Tullow as they threaten to challenge the legality of the agreements at the Constitutional Court.

Oil Network Uganda, an activist civil group, is mobilizing communities to oppose the construction of any refinery or pipelines until a new law is enacted to provide proper compensation, resettlement and conflict resolution to those affected or displaced by the project, said Henry Mugisha, chairman of the group.

Eleven residents who say they have lost grazing grounds and harvests during drilling for oil exploration are threatening to sue Tullow. The company says it has paid about 38,000 claims for structures and crops damaged during its exploration for oil but farmers complain it took months to get paid and that the rates were too low at just over $1 for each square meter of a cassava plantation. Orchards of mangoes and oranges also have been lost. Tullow declined to say how much it had paid in total compensation.

Community activist Isaac Nkuba of the Buliisa NGO forum said the damage occurred in January 2011 and people were only paid last November and December.

Francis Beeta, a farmer who was paid nearly $340 for his destroyed cassava plantation said: "We are angry because we feel like we have been cheated."

Uganda issued its first oil exploration license in 1902 when it was a British colony, according to Fred Guweddeko, a Makerere University research fellow. The poor quality of the waxy and sulfur-laden oil kept companies from pumping it out until new technology and high oil prices made it viable. Now drilling rigs for test holes have been sprouting on Uganda's landscape.

Conservative estimates suggest Uganda could earn around $2 billion a year for the next 30 to 35 years from the deposits, which lie below forests and lakes along a border with conflict-torn eastern Congo.

Despite the efforts at gaining transparency, skepticism is running high that the Uganda's oil will better the lives of its regular citizens. Uganda's government has made huge stride fighting poverty, with about 25 percent of the population living below the poverty line in 2010, according to the World Bank, but the country is struggling with a growing gap between rich and poor.

"All signs are that Uganda will be the latest nation to fall victim to the 'oil curse' -- cheated of its financial benefits by a corrupt government and left with extensive environmental damage," said Uganda's Association of Professional Environmentalists.

Critics are already complaining that more than $300,000 paid in signature bonuses on oil contracts already have gone missing. Legislators have accused the prime minister and two Cabinet ministers of taking millions of dollars in bribes from Tullow -- charges Tullow denies.

Two long-serving Cabinet ministers and stalwarts of President Yoweri Museveni resigned this week over graft allegations unrelated to oil. Three other ministers were forced to resign last year because of corruption allegations. Museveni has been in power since 1986.

The Constitutional Court has barred legislators from investigating their charges while it rules on a motion that the parliamentarians' investigation is improper and out of order.

Tullow spokesman George Casanove said documents presented to Parliament are "forgeries, unquestionably and irrefutably." He said the company is looking forward to demonstrating that publicly when it is summoned to appear before the parliamentary committee. He said the company does not know who made the forgeries, or what the motivation was.

Still, legislators and activists also are angry with Tullow, and the issue has divided legislators from the president's party. Ugandan newspapers report that some have had a change of heart though because of a new $40,000 allowance to buy cars.

"The culpability of government is obvious but so is the role of Tullow," said Ssekikubo, a legislator from Museveni's party. "If you promote the breakdown of the rule and law in the country of your interest, how will you ensure that your interests are covered?"

[Associated Press; By MICHELLE FAUL]

Faul reported from Johannesburg. Associated Press writer Rodney Muhumuza in Kampala, Uganda contributed to this report.

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