Uganda's Oil and Refinery Oil Deal

Uganda’s Oil and Refinery Oil DealIn numerous interconnected articles, Bariyo provides information on the progress and hiccups in the formulation and finalization of an oil deal in Uganda for many of the major international oil companies seeking to estab lish an investment in the country’s reportedly large oil deposits. In the articles, Bariyo identifies various issues that have arisen since the discovery of oi l in Uganda’s Lake Albertine Rift basin in 2006 (Bariyo). There have been numerous attempts to acquire tenders to extract the oil by some international oil companies but these deals often fell through until UK Company, Tullow Oil PLC gained a foothold in the running only for more chaos to erupt in the form of corruption allegations. In addition, the demand by the Uganda government to have a refinery built in Uganda in order to create employment opportunities for the local as well as the establishment of a long pipeline from Uganda to the East African Coast made cohesion and corporation between the government and oil companies difficult. Some international and local media referred to the standoff as a war (Bariyo). Both demands by the government represent significant start up costs for any company willing to invest in the venture. However, the projected pay off from the proceeds and the estimated oil reserves indicate the cost may indeed be worthwhile considering the immense international attention the situation receives. This paper analyses the current stand of the situation and the reason the incidents draw significant interest from personalities on Wall Street where the international exchange of energy goods such as oil has an unmatched ripple effect on all other markets.According to Bariyo (Web), Uganda’s oil, reserves stand at approximately 3.5 billion barrels. This would effectively make Uganda one of Africa’s largest oil producing nations after Nigeria and Angola. However, unlike most other oil producing nations in Africa, Ugandaoperates in relative peace and political stability, making it a prime African country to invest in terms of oil. Unfortunately, the discovery and negotiation of development plans on the extraction of oil in Uganda has already taken seven years, comprised mainly of corruption allegations and disagreements between the Ugandan government and the oil companies. Corruption allegations began in 2011 when a Ugandan Member of Parliament presented a motion in Uganda’s Parliament accusing some top Ugandan officials, including the Ugandan Prime Minister, of receiving bribes from the UK oil company, Tullow Oil PLC (Bariyo). Hence, investigations into the graft became necessary, stalling all progress towards the signing of a deal for the extraction of oil. Furthermore, the incident sparked numerous legislative debates in the country because the discovery of oil necessitated the formulation of laws to govern its extraction and management as a national resource. In fact, Tullow Oil PLC’s attempts to sell a portion of its investment to Total and Cnooc limited met much resistance where the Ugandan Parliament insisted the company waits until Parliament passed new laws to protect the country and its resource (Bariyo). Prior to the discovery, Uganda did not have legislation on oil extraction. Hence, the in-house political strife stifled the development of the industry in Uganda.Aside from the internal wrangles, the oil company, Tullow Oil PLC, seemingly could not agree with many of the demands of the Ugandan government. Even though the country does not have a national oil company, the government held various demands and requests of international companies interested in extracting the oil. The main area of contention was on the aspect of the oil refinery. The international companies aimed to extract the oil and retail it on the open market in its crude state using a pipeline from Uganda to the East African coast. However, the Ugandan government demanded the construction of an 180,000-barrels-per-day refinery in Uganda to process the oil and deliver final products to the market as well as meet all the domestic oil needsof the people of Uganda (Bariyo). The two parties finally agreed to construct a 30,000-barrels-per-day refinery this week. In addition, the parties agreed on the construction of an export pipeline after Total stated its project in Uganda would stall if the government did not approve the construction of a pipeline in February. Currently, the negotiations seem close to concluding with the optimal options for both parties attained.These proceedings host significance to Wall Street simply because of the challenges in the international energy sector where oil is becoming an increasingly scarce resource causing the international prices to fluctuate sporadically to even the slightest of changes. In addition, the price of a barrel of oil inadvertently determines the value of the dollar across the entire world. The introduction of a new oil resource from Uganda into the international market would undeniably have repercussions on the international oil market and the stock exchange markets across the entire world. In addition, the price of stocks from the oil companies involved as well as Uganda government investment options such as government bonds would increase in value with the signing of the deal. Wall Street would instigate this change through other international stock exchange markets such as in Asia and the UK.In conclusion, Bariyo’s article on the establishment of an oil refinery deal and all other insights into the development of the Uganda oil plans would be of immense interest to an investor on Wall Street mainly because the information would act as an indication of the changes in stock value for all the international companies involved. In addition, the available Uganda government investment options would increase in value. The oil industry is one of the most lucrative in the world and any company and country involved undoubtedly draws international interest, especially from Wall Street.Work CitedBariyo, Nicholas. “Uganda reaches deal with Oil Companies over Refinery.” Business. Wall Street Journal. 15 April 2013. Web. 15 April 2013.。