Global oil prices dropped sharply over the past seven months, leading to significant revenue shortfalls in many energy exporting nations.
From 2010 until mid-2014, world oil prices had been fairly stable, at around $110 a barrel. But since June prices have dropped to as low as $48 a barrel.
Several of the world oil companies have felt a great deal of the pinch since late last year, and several of them announced cutbacks to cope with the falling prices.
Tullow Oil for instance had earlier this month declared it was writing off $2.2bn as a direct result of the oil price collapse.
It also slashed its exploration budget for this year to $200m from around $1bn at the start of 2014.
BP on the other hand said it would shed 200 staff jobs and 100 contractors in its North Sea operations.
The oil prices had been anticipated to have devastating ramifications on oil and gas fields in budding producers like Uganda, but Government here believes otherwise.
In an exclusive interview with Chimpreports, Commissioner Petroleum Exploration and Production Department under Ministry of Energy Mr. Ernest N.T. Rubondo said it was too early to spell out doom for Uganda’s oil industry.
“International Oil prices always fluctuate by going up and down. It too early to predict how low the prices will drop this time round or how long this reduction will last,” he said.
Uganda concluded the appraisals for petroleum discoveries at the end of last year with the submission of the remaining applications for production licenses.
Mr Rubondo says it’s still hard to make predictions of the price impact since there is no crude oil production in the country yet.
“Oil and gas projects are long term in nature and the short term fluctuations of oil prices are always factored in the developments,” he said.
Earlier President Yoweri Museveni had reassured that the dropping prices would not hamper Uganda’s oil industry, or the construction of the 60000 BPD oil refinery.
He noted, “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 optimism that the prices would soon pick up again, especially that the American Shale gas extraction is proving rather expensive.
As for the Refinery progress, Mr Rubondo says negotiations are still underway between government and two firms SK Group and RT Global Resources, the only remaining in the race for becoming the lead investor in developing the facility.
“These negotiations were required so as to give the two bidders clarity on Government’s requirements and to also understand their expectations as investors before they submit their final offers.
He added, “The bidders requested for specific considerations to facilitate the anticipated large investment for the refinery and these considerations have necessitated consultations within Government hence the need for additional time.”