Uganda is not fretting just yet about the tumbling world crude oil prices, President Yoweri Museveni has said.
World Business news is still dominated by the recent sharp drop in the oil prices which sparked smiles in big petroleum consumers while wrecking havoc in the world producers.
The fast plummeting prices of oil are also projected to come with fierce ramifications for emerging oil producers like Uganda.
In June last year, the price of crude was up around $115 per barrel. By yesterday morning it had fallen as low as $49.95 in Texas, USA.
The unprecedented fall is being attributed to a set of factors, top of which is a number of companies taking to extraction of oil from Shale formations in the US and Canada, following the sharp rise in global demand in the mid 2000s.
It is said that the US alone has added 4 million new barrels of crude oil per day to the global market since 2008.
The trend is anticipated to come as bad omen for Uganda which has been marching steadily towards commercial oil production.
Questions are also being raised on whether the envisaged construction of a 60,000 BPD oil refinery in Buseruka Sub county, Hoima District will be economically tenable under such circumstances.
It not clear whether the shortlisted companies SK Group (South Korea) and RT Global Resources (Russia) which were recently issued a Request for the Final Offer [RFFO] by government, won’t be shocked on backtracking on the project due to the new oil prices.
But President Museveni reassured that the dropping prices would not hamper Uganda’s oil industry and that construction of the refinery would proceed as planned.
He revealed on a radio talk show over the weekend: “For us, whatever the price of oil is, we shall produce our oil. If the companies don’t want to build the refinery, we shall build it ourselves.”
Mr Museveni reasoned that with more than 6 billion barrels confirmed in the reserves so far, even at $50 a barrel, they would rake in more than $120 billion from the recoverable crude, which is not a loss considering that the refinery could cost around $2.5 billion.
He also expressed pessimism that the prices would soon pick up again, especially that the American Shale gas extraction is proving rather expensive.
Experts hold that if oil stays below $60 per barrel, some US companies will cancel or scale back shale drilling. Indeed reports show that a number of big companies are already pulling out of Texas’ Permian Basin for now
This, Mr Museveni says is perhaps why OPEC, the world’s biggest Oil Cartel chose not to retaliate by cutting back on its production, to prop the prices up.
“When the prices collapse below a certain point, the Shale operations won’t be profitable anymore,” he noted.
On a brighter side, the low prices have been projected to “have ramifications on every nation in the world.” It is excellent news for all large scale oil consumers who are rubbing hands or major lows in petroleum prices.
President Museveni however expressed disappointment that the falling world crude prices are yet to be reflected at Uganda’s fuel pump.
With the world prices halving over the past six months or so, petrol and diesel prices should have dropped by at least Sh 1000 by now.
Most fuel dealers have however made paltry reduction of about Sh 100, while others are still maintaining the pump price.
Museveni promised to investigate why the local companies are not reacting to the global trends, yet normally at the announcement a slight rise in the global crude prices, they move swiftly to spike the pump prices