oil money: company profit v. citizen profit...

Uganda oil contracts give little cause for optimism

The Katine project is providing a compelling case study in the complexity of sustainable development. Genuine progress - when possible within the constraints of a liberal capitalist model - comes from solutions that are local, evidence-based and democratically accountable. There are few quick fixes and no magic wands.

But the exploration and imminent production of oil in western Uganda is being seen as just that - an easy answer to complex problems. Both government and the oil companies involved have been busy painting a roseate picture of bumper revenues and a country transformed. Forget the intricacies of agricultural reform, social ownership and political liberalisation; Uganda, we are told, will be turned into a middle-income country by $2bn a year in hard cash.

But the problems facing Uganda - and Katine - are almost certain to be exacerbated rather than solved by oil. Last month, the campaigning group PLATFORM published three of the production sharing agreements (PSAs) the government has spent years keeping a closely guarded secret. The deals point towards a resource extraction programme designed for profit, not development, and contain a series of provisions that undermine any hope of changing course.

At the moment it seems like everyone wants a piece of Angola. The queue of prominent visitors is long with the USA’s Secretary of State Hillary Clinton at its head. Where it smells of oil one can also find China and they mention that China is thought to have contributed $5 billion in loans to develop Angola’s infrastructure. The investment is necessary after 25 years of civil war. The repayment will, presumably, be made in the form of oil.

The first oil was found in 1955 in the Kwanza valley but it was when they found oil offshore at the end of the 1960s that it became important for Angola. In 1973, crude oil was Angola’s most important export, and today it is 90%. (Their second largest export is diamonds.) The really large oil finds were first made when they began to explore in deep water. OPEC reports that Angola has reserves of 9.5 billion barrels but the nation’s own news sources assert that reserves are 13.1 billion barrels and there are estimates where they believe that there can exist as much as 19 billion barrels in the ocean outside Angola. From a global perspective where we consume 30 billion barrels per year, Angola’s reserves are not so large and are less than what remains in Norway....

In recent years production has been around 1.9 million barrels per day (Mb/d) of which they have exported 1.8 Mb/d. The projects that are planned can increase production by 1.2 Mb/d which would raise Angola’s production to about 3 Mb/d. This is the same level that Norway had as their Peak Oil production. If one considers that Angola’s reserves are clearly smaller than Norway’s you can understand how aggressive the oil production that the international oil companies are conducting is. One can justifiably say that this is plunder of Africa’s oil and, once again, Africa is being exploited. Angola and Africa would have fared much better if they had had a different oil production profile.

It is difficult to determine how Venezuela has been spending its oil windfall, given the lack of government transparency (the country ranks 162 out of 179 countries ranked on Transparency International's corruption index). However, from the few official figures the government has released and its stated pledges of aid to foreign countries, it is possible to glean a picture of billions of dollars dispersed on activities not directly related to PDVSA's core business. Analysts express frustration that these reports lack detail, and efforts by news organization to obtain further information from government agencies have been rebuffed (NYT).

PDVSA has transferred billions of dollars to Fonden, the off-budget investment fund many experts say is financing Chavez's social projects. According to International Oil Daily, an energy trade publication, PDVSA spent $14.4 billion on social programs in 2007 (as compared to $6.9 billion in 2005). These programs include projects such as medical clinics providing free health care, discounted food and household goods centers in poor neighborhoods, indigenous land-titling, job creation programs outside of the oil business, and university and education programs.

Increased oil revenues have also given Chavez the ability to extend assistance programs outside Venezuela’s borders. For example, he provides oil at a preferential price to many countries in the Caribbean through the Petrocaribe initiative. In 2009, a Venezuela-backed home heating program to low-income households in the United States was briefly halted, a sign that low oil prices may be forcing Chavez to reconsider (TIME) some of his social programs. In August 2007, the Associated Press calculated that Chavez had promised $8.8 billion in aid, financing, and energy funding to Latin America and the Caribbean between January and August 2007, a figure far higher than the $1.6 billion of U.S. assistance for the entire year. Though it is impossible to determine how much of that funding was actually dispersed, the difference in aid is striking. Chavez is also suspected of funneling money to the FARC, a Colombian guerrilla group, as well as providing funds to Argentine President Cristina Kirchner’s election campaign in 2007—though he denies both charges.