All things considered – and there were plenty of them – I thought that Nigeria had actually dealt quite well with the prolonged demise of its president, Umaru Yar Adua, even though the secrecy over the past few months had tipped over into farce: rule by the non-dead, anyone? But whether Yar Adua actually died months ago, or had lapsed into a coma, or had merely been very, very sick, he definitely did not govern anymore. Nigeria’s laws stipulate a transition for such a case: That if the president is incapacitated, the vice president takes over. Very straightforward, in principle. I can’t even begin to imagine the wrangling behind the scenes, the (proverbial) fur flying, but in the end, Nigeria did stick to its own rules, and no military coup either.
Nigeria flickered through my mind when I sat in the Global Pacific & Partners East Africa petroleum conference. Uganda was probably the main draw, the key reason why the event was so well attended: Last year, exploration company Tullow Oil have gone from success to success in drilling wells, and it confirmed that Uganda has commercially viable oil reserves. Suddenly, East Africa is on the map for hydrocarbons.
And ever since Uganda’s government knew that there were significant quantities tucked away under Lake Albert, they were faced with the massive challenge of creating the environment to actually have an oil sector: Update the regulatory framework, build new institutions, look into transport and other infrastructure issues: Nobody is yet quite clear how to get the oil out of the country – refined or crude, on trucks, on trains, in a pipeline. With the transition to oil production, Uganda will soon host major international oil companies: After fending off a bid by Italian ENI, Tullow Oil are making use of their pre-emptive rights to buy out Heritage Oil from two blocks they owned jointly, and have recommended to the Ugandan government bringing in both CNOOC and Total, who will hold one third each along Tullow Oil with the remaining third. But one point that the Ugandan government kept repeating again and again was that it would not go the Nigeria way. In fact, advice from Nigeria had been sought to prevent an East African version of the Niger Delta, they say.
That, of course, means very little. Governments and, in particular, people in governments say all sorts of things, and just because they say them doesn’t mean they are true: Corruption will be eradicated in 100 days. I have only one wife. I have no idea how ‘national security’ got in there. Thank you. Next please. And kindly stop grinning, it’s actually not funny.
So Nigeria has managed, imperfectly, but still managed, to take two key steps: Halt any third term ambitions by former president Olusegun Obasanjo, and stick to its own rule for succession if the president is incapacitated. Uganda, in contrast, had already been recycling its president for a quarter of a century when it learned that its confirmed oil reserves have reached the threshold of commercial viability. And it shows little sign of following Nigeria with respect to term limits and presidential succession.
Uganda in 2010 is not Nigeria decades earlier. The entire environment has changed: Never mind the differences in the industry structure, technology and regulations, modern media also mean that there is a lot more visibility of companies involved, far more scrutiny, and instant transmission of information around the globe. Typically, listed Western companies now operate under different restrictions as reputational risk has become a far more established risk category that can even affect their listing status. But irrespective of that: In Uganda – where even pre-oil, the president had little intention of going anywhere in a hurry ‑, the discovery of oil has upped the stakes in politics, and exacerbated the political risk. This is worth observing for oil companies, but probably even more so for everyone else in business.
And at the conference opening, Kenya’s Energy Minister Kiraitu Murungi – he of the subtle ‘go a bit slow, it’s us’ AngloLeasing anti-corruption treatment – seemed to almost chuckle with his stated anticipation of soon making a major announcement on oil drilling results. Should Kenya never find any oil or gas, the country still has a multitude of business opportunities from oil production in Kenya and Southern Sudan, and possibly the Ogaden, too: in infrastructure, in refining, in transport, as a hub for the service industry. But should Kenya find oil, I wonder: If the Kenyan thuglords can mastermind the violence of early 2008 (unfortunate images that are now firmly a thing of the past, Murungi assured us), then what will that look like once you factor commercial quantities of oil into the calculation of returns on your political investment?
Republished with kind permission from the (Nairobi) Star.
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