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Since discovering oil in 2009, Uganda hasn’t pumped a single barrel and the resource remains unexploited.

An historic opportunity has so far been stymied, according to East Africa security consultant Michael Ndichu Kuria.

He cites  bureaucracy, law suits, corruption, hostilities with neighbors taking on a military hue, as well as the lack of adequate infrastructure to move the oil to market.

Kuria lists three reasons behind Uganda’s blank slate with oil production.

First, corruption. Soon after oil was discovered, he said, allegations emerged implicating the country’s prime minister had accepted bribes and other favors to support the farm-down of the license to Chinese, French and Italian firms. Parliament investigated but didn’t act.

Second, an incoherent legal regime that creates uncertainty about what taxes and levies are due to the government.

In 2010, for example, Tullow Oil acquired the assets of another oil exploration company called Heritage Ltd for $1.45 billion. Confusion under the tax code about who was liable for the capital gains tax of $434 million turned into a dispute. That caused Uganda to stop Tullow’s further production and development work on the oil field until the tax bill was paid. While the  case is on appeal, oil production is stalled.

Third, infrastructure required to move crude oil from the Lake Albert region to where it can be refined hasn’t been developed. ‘There are no roads, railways or pipelines to enable this,’ Kuria said.

To further complicate things, skirmishes have broken out between the armed forces of Uganda and the Democratic Republic of Congo over where to draw the borders in the oil producing region.

Source: The FCPA Blog