Oil in Uganda

fourLINK Blog

Uganda's New Oil Discovery: Fuelling Sustainable Development

17th December 2021

Oil drilling rig in Uganda

Uganda, a landlocked country in East Africa renowned for its diverse landscapes and rich cultural heritage, is poised to usher in a new era of economic growth and development: based on oil. The significant oil reserves within its borders has the potential to reshape the nation's economic landscape, positioning it as a major player in the global energy market. While the world attempts to wean itself away from oil, the clear reality from the recent fuel price hikes is that we're a long way off, and still heavily dependent on supply. It's precisely this position which Uganda hopes to achieve multiple benefits to the economy, from increased government revenue to higher value job creation and infrastructure development. 

The extraction of oil in Uganda presents a remarkable opportunity to bolster the country's revenue streams. With the right management and oversight, the oil industry can become a key contributor to Uganda's national budget. Revenues generated from oil exports can be utilised to fund essential public services such as healthcare, education, and infrastructure projects. Roads have already seen a dramatic improvement, opening up access throughout the country. This injection of capital is already helping bridge existing gaps and providing citizens with improved living standards.

While many will criticise any type of further oil related extraction and the subsequent environmental damage caused by burning hydrocarbons, paradoxically there are opporunities for sustainable development which the oil will bring Uganda.  The oil sector is renowned for its ability to quickly create a wide range of job and investment opportunities, both directly and indirectly. The industry demands a diverse skill set and a large amount of human resources that can provide meaningful and higher value employment to Uganda's burgeoning workforce. Additionally, the need for specialised training and education is already driving investments in local educational institutions, fostering the development of a skilled labour force that can contribute not only to the oil sector but also to other industries.

The growth of the oil industry often goes hand in hand with significant infrastructural improvements. To effectively extract, transport, and export oil, Uganda has been investing in transportation networks, including roads, pipelines, and the airport. Such infrastructure developments can have a multiplier effect on the economy by creating additional opportunities in construction, logistics, and related industries. Moreover, enhanced infrastructure can boost connectivity between different regions of the country, encouraging economic diversification beyond oil. 

Within the oil extraction area, traditionally one of the poorest areas of Uganda, the oil money is trickling down to workers, meaning more and more people are investing in solar power, which is improving the quality of life.

While oil presents a unique opportunity, it's important for Uganda to avoid the "resource curse" – a phenomenon where excessive reliance on a single resource can hinder economic diversification. The country must ensure oil revenues are wisely managed, invested in other sectors, and saved for future generations. By doing so, Uganda can build a resilient and diversified economy that is less vulnerable to fluctuations in oil prices.

Uganda's newfound oil reserves hold immense promise for the nation's economic future. With careful planning, transparent governance, and strategic investments, the oil industry can become a catalyst for sustainable development, improving the lives of Ugandans for generations to come. As the country prepares to embark on this new chapter, collaboration between government, industry players, and local communities will be crucial in realising the full potential of this valuable resource.