| KAMPALA, April 1
KAMPALA, April 1 The path appears clear for
President Yoweri Museveni to lead Uganda through a fourth term
in office after planned opposition protests failed to
East Africa's third largest economy took a step closer to
becoming a significant oil producer in March. British oil
explorer Tullow Oil (TLW.L) agreed to sell stakes in its Ugandan
operations to France's Total (TOTF.PA) and China's CNOOC
(0883.HK) for $2.9 billion, bringing in big partners to develop
the oil fields.
Museveni, who won February's election with more than
two-thirds of the vote, was for years considered one of Africa's
standout leaders, astute on the economy and able to stabilise a
country with a long history of strife.
He has come under increasing fire, however, for what critics
see as an authoritarian streak and mounting levels of
Those allegations of corruption will worry investors
watching the soon-to-be newest oil producer, set to start
producing and exporting during Museveni's new tenure.
Here are some of the factors to watch:
PROTEST THREAT GONE, NEW CABINET
Opposition leader Kizza Besigye's calls for protests seem to
have fallen on deaf ears. The stage is now set for Museveni to
push forward with his programme for the next five years.
Museveni, in power for 25 years, will appoint a cabinet in
April. Most analysts expect him to try to distribute seats
fairly among the country's ethnic groups and regions, though
some fear he may reward areas that supported him the most.
If there is a perception that plum jobs have been awarded to
close allies and those from Museveni's home region, discontent
What to watch:
-- The cabinet reshuffle and the reaction to it.
-- A proposal by a member of the ruling National Resistance
Movement to extend the presidential term to seven years from
five years. If parliament passes such an act, it will fuel
suspicions that Museveni wants to remain president for life,
worrying potential oil and gas investors.
OIL DISPUTE RESOLVED?
Tullow has agreed to sell each of Total and CNOOC a one
third interest in fields around Lake Albert, which Tullow
estimates to contain 1 billion barrels of oil, and potentially
as much as 3.5 billion barrels. Tullow will retain a third
But the deal appears to leave a massive tax dispute with the
Uganda's Energy Minster Hilary Onek said the country would
receive a total of $472 million in taxes from the farmdown deal.
Tullow, however, said this figure was calculated incorrectly
and that it believes the total liability to be "significantly
less" than the $141 million it has agreed to deposit with the
government pending discussions on the matter.
Tullow brought in Total and CNOOC to help develop the fields
in a $10 billion project. This will involve the construction of
a pipeline to the east African coast and other infrastructure.
Tullow said it expected production of around 20,000 barrels
per day for the local market by 2015. Total said full scale
production could exceed 300,000 bpd.
With the Tullow's new partners onboard, Uganda's oil
industry is set to power forward, though worries persist over
potential corruption and the fact the deals Uganda struck with
oil firms remain secret.
A leaked U.S. diplomatic dispatch revealed America's
Ambassador Jerry P. Lanier had proposed travel bans on certain
Ugandan cabinet ministers following allegations by Tullow the
politicians had taken bribes from Italian oil group Eni.
What to watch:
-- Closure on the tax spat. How much will Uganda get?
-- Any impact from the windfall on Uganda's shilling? Most
traders doubt Uganda will use its new petrodollars to prop up a
currency the central bank considers undervalued. But will
government spending surge, strengthening the shilling and
possibly easing inflation concerns.
-- Renewed allegations of corruption around oil industry.
-- Uganda plans to open a new petroleum exploration
licensing round for blocks in its oil-rich Albertine Rift basin
in 2011. Investors will be watching how the tax dispute plays
out and any changes to legislation.
-- Sustained post-election calm might help engineer a rally
in the shilling, helping to check a rising inflation rate in the
Somalia's al Shabaab rebels have threatened more attacks on
Uganda after their twin suicide-bomb attack on Kampala in July
last year claimed 79 lives. The latest warning came on Dec. 23.
Three days earlier, one person was killed in a grenade blast
on a Kampala-bound bus in Nairobi. Kenyan and Ugandan police
said the explosion may have been linked to al Shabaab's threats.
On Dec. 10, Ugandan police, acting on intelligence, seized
suspected bomb making materials from another bus in Kampala.
Al Shabaab has vowed to strike Uganda and nearby Burundi
until they withdraw their peacekeeping troops from Somalia's
capital, Mogadishu. The troops are all that stop insurgents from
toppling the weak Somali government, many experts say.
Uganda tightened security in Kampala before the elections
and has had a number of intelligence successes against al
What to watch:
-- More attacks by al Shabaab. Further strikes could deter
foreign investment inflows, send the shilling UGX= south,
disrupt the business tempo, hurt tourism and knock the economy.
-- Continued foiling of al Shabaab plans by Ugandan security
forces may convince some that they are on top of the threat.
(Editing by Richard Lough)