Uganda’s oil journey and delicate balance of development

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OPINION

Can Uganda strike gold with oil without losing its green heart?

By Sarah Birungi Banage

The unsung hero of modern life

As you sip your morning coffee, commute to work, or charge your smartphone, there’s an invisible force powering it all: petroleum. This unassuming resource fuels cars, generates electricity, and manufactures everything from plastics to medicines. Globally, it’s a geopolitical cornerstone, shaping economies and international relations. Yet, for Uganda, petroleum represents more than just energy—it’s a gateway to economic transformation.

In 2006, Uganda struck oil in the Albertine Graben, a biodiverse region close to Lake Albert. With an estimated 6.3 billion barrels of oil underground, 1.4 to 1.7 billion recoverable, the discovery promises to redefine the nation’s future. His Excellency President Yoweri Museveni describes it as a catalyst for “economic transformation, industrialisation, and national prosperity.

While the nation prepares to pump its first oil in a year’s time, a critical question lingers: How can Uganda harness this “black gold” to fuel progress while safeguarding its natural heritage and communities? At the heart of this balancing act is the Uganda National Oil Company (UNOC), the state-owned steward tasked with turning oil dreams into sustainable realities as it marks its 10^th anniversary in 2025.

From discovery to development: A nation’s hope

Petroleum exploration, often simplified as “searching for oil,” involves seismic surveys, exploratory drilling, appraisal and evaluation to assess the commercial viability of the discovery, and partnerships with global energy giants. For Uganda, this means jobs, infrastructure, and a chance to leap into economic prosperity.

Yet oil is not without its complexities. The process requires careful planning, advanced technology, and expertise to ensure safe and responsible exploratory practices. Oil is a finite resource, whose impact lasts forever, as often stated by Proscovia Nabbanja, the CEO of UNOC, adding that UNOC’s role is to ensure it benefits all Ugandans, not just today’s generation.

Following the announcement of the Financial Investment Decision (FID) in February 2022 that unlocked a $15b investment inflow, Uganda’s oil and gas sector transitioned from the exploration and appraisal phase to the development phase, marking a significant journey to the production of petroleum resources and achieving first oil. This journey has involved activities, namely field development plans, production licenses, infrastructure development and pipeline construction, to mention a few; all of which have led to employment opportunities and the leap into economic prosperity.

UNOC: The Guardian of Uganda’s oil future

Established in 2015, UNOC operates as the bridge between Uganda’s aspirations and the technical expertise of international firms like TotalEnergies and CNOOC, which are the joint venture partners to UNOC. Its mandate? To protect Uganda’s 40% stake in the refinery project, 15% stake in each of the oil projects, namely Tilenga, Kingfisher and EACOP, and negotiate favourable terms, in addition to prioritising local participation.

Key to UNOC’s strategy is local content. The National Supplier Database has registered approximately 3,000 Ugandan businesses, from catering services to engineering firms, ensuring they get a slice of the oil pie.

Already, over 15,000 people are employed directly in the oil and gas sector, with 90% being Ugandans and over 4,700 from surrounding communities. Of this workforce, 63% are employed in management positions, while 93% are employed in technical positions and 98% in support functions.  A quick look at capacity building shows that over 14,000 Ugandans have been trained and internationally certified in various oil and gas disciplines.

UNOC has additionally made significant contributions to national content in the oil and gas sector with key achievements namely: Building internal capacity through internal training, secondments, and industrial placements to develop in-depth expertise especially as the company progresses into operatorship; Supporting local companies through incubator programs with commercial banks to educate local companies on how to compete for contracts in the sub sector; Supporting supplier development by building capacity at national and community levels through programs aimed at enhancing local content; Internship and attachment in UNOC’s operations to equip Ugandans with necessary skills; and finally Employment opportunities for Ugandans.

UNOC and the Joint Venture (JV) partners have also launched community projects to include Keep a Girl in school, Youth skilling programs, e.g. international welding and fabrication certification, building schools, clinics, and water systems —to ensure the communities are empowered as development progresses. For Enterprise development, the capacity of over 2700 entities in the country has been built over the last 5 years, with over 5,900 engaging in supplier development workshops and over 2,500 engaged through conferences.

The economic promise: Jobs, roads, and schools

The numbers are exciting. The oil sector is projected to create over 160,000 jobs, of which 14,000 will be direct jobs, 42,700 will be indirect, and 105,000 will be induced jobs with spillover benefits in agriculture, tourism, and construction.

The linkages with other sectors, namely agriculture, tourism, health, manufacturing, education, and other productive sectors, are estimated to increase GDP by $8.6b in the next three years. Currently (Sept 2024), there are over 15,000 direct jobs, while 34,889 are indirect and 100,115 remain induced. Revenues from oil are estimated to peak at $2b annually and will fund highways, hospitals, and classrooms, among other infrastructure projects.

In Hoima, a once-sleepy town now buzzing with activity, local entrepreneur Sarah Kugonza runs a thriving supply shop. “Before oil, I sold maize. Now, I supply safety gear to rig workers,” she says. “This is our chance to grow.”

The environmental tightrope

Yet, Uganda’s oil lies in ecologically sensitive areas, including the shores of Lake Albert and near Murchison Falls National Park. The proposed East African Crude Oil Pipeline (EACOP), a 1,443 km heated pipeline to Tanzania’s coast, has drawn criticism with Activists warning of deforestation, displaced wildlife, and carbon emissions.

UNOC, however, maintains that it is walking the talk on sustainability. The company, along with its partners, adopted and is already implementing global standards, including aggressive reforestation programs with a plan to plant 40 million trees under the Alliance For Climate Resilience (ACR) – launched in partnership with the Church of Uganda. The company is committed to greening the environment, as often stated by Dr. Michael Mugerwa, the GM-Uganda Refinery Holding Company.

Sustainability remains central to these projects, aligned with Uganda’s policy of balancing fossil fuels and renewable energy. Environmental safeguards have been established, ensuring the projects maintain low carbon and low emissions. By providing gas as an alternative to traditional biomass, these initiatives will also help ease pressure on the country’s forests.

Communities in the crossfire

For families living atop oil reserves, the trade-offs are deeply personal. A total of 727 Project Affected Persons (PAPS) have been compensated and land acquired fully for the Kingfisher project in Kikuube district. Additionally, 4,954 Project Affected Persons (PAPs) were compensated, and corresponding land was acquired for the Tilenga project to make way for infrastructure for the two projects. Project Affected Persons had the option for in-kind or cash compensation or relocation, and the process was only deemed complete when they willingly signed consent to the package options.

UNOC and the joint venture partners, TotalEnergies and CNOOC, remain committed to fair compensation and livelihood restoration for the affected families, which is still ongoing on the ground. In Buliisa district, farmer James Mugisa used his payout to start a fish farm and states that the oil money helped him tremendously, although he still worries about pollution. On the other hand, the Government of Uganda launched an ambitious National Oil Spill Contingency Plan and has held several awareness and engagement programs from the National level right up to District levels to ensure fears such as James Mugisha’s are well contained.

Notwithstanding, progress shouldn’t mean losing our land or traditions, says Beatrice Kemigisa, a Community Elder. The companies have additionally endeavoured to maintain the community heritage and executed a well-thought-out Resettlement Action Plan (RAP) in accordance with not only National laws but additionally in accordance with stringent guidelines such as the International Financial Corporation (IFC) guidelines.

The road ahead: A model or a cautionary tale?

As Uganda stands on the brink of an oil era, the world watches. Will it emulate Norway, which used oil wealth to build a trillion-dollar future fund? Or will it succumb to the “resource curse,” where oil breeds corruption and inequality? Already the country attributes its pace over the first 12 years from discovery to development as a worthwhile phase in which a lot of benchmarking was done around the world to learn the successes from oil predecessors and pick the lessons, while additionally visiting the struggling nations to learn what not to do in the Ugandan oil space.

UNOC’s success hinges on transparency. The company joined the global Extractive Industries Transparency Initiative (EITI), a move lauded by watchdogs. Economists like Daniel Muwooya often say that the key is to treat oil revenue like a national savings account, where the country saves for tomorrow while investing in today. Likewise, the country has established a Petroleum Fund – a depository for all revenues from petroleum and related activities, as outlined in the Public Finance Management Act (PFMA). The Fund aims to manage and invest oil revenues for the benefit of current and future generations, dispelling fears of the oil curse.

To date, local companies have secured contracts worth $1.7b, demonstrating the sector's potential for economic growth and development.

Final Word

Uganda’s oil story is still being written. For every hopeful entrepreneur like Sarah Kugonza, there’s a farmer like James Mugisa weighing risks against rewards. UNOC’s challenge—and Uganda’s—is to prove that progress and preservation need not be enemies. As the first barrels of oil flow in 2026, the nation’s choices will echo far beyond its borders, offering lessons for resource-rich Africa.

In the words of a Ugandan proverb: “A single tree cannot withstand the storm.” For Uganda’s oil journey to succeed, it will take roots deep in sustainability and branches reaching toward shared prosperity. As UNOC celebrates its 10^th anniversary, this is going to be key for the company’s next decade of existence.