Uganda is poised to undergo a significant economic boost with the impending oil production, courtesy of revenues from the Oil and Gas sector, according to the Petroleum Authority of Uganda (PAU), which is headed by Mr. Ernest Rubondo.
The government’s revenue streams will include royalties, profit oil, state participation, and taxes, all of which are expected to contribute substantially to the country’s economic growth.
Revenue Streams Breakdown
Royalty Payments
The government will receive a 5%–12.5% royalty on total oil production, depending on output levels.
Cost Recovery
The Uganda National Oil Company (UNOC) will recover its exploration and development costs, capped at 60%–70% of the remaining oil after royalty deductions.
Profit Oil
The remaining oil will be shared between the company and the government according to Production Sharing Agreement (PSA) terms.
Corporate Tax
The government will collect corporate tax (~30%) on the oil company’s share of profit oil.
Economic Benefits
The oil and gas sector is expected to bring in significant investments, with approximately USD20 billion (about Shs77.2 trillion) already committed to various projects, including the Tilenga and Kingfisher projects in the upstream sector, the East African Crude Oil Pipeline (EACOP), and the Uganda Refinery project.
These investments will not only boost economic growth but also create employment opportunities and stimulate local economic development.
Local Content and Employment
The oil and gas sector has already created over 14,000 jobs, with Ugandans making up 90% of the workforce. Additionally, contracts valued at USD5 billion have been awarded to Ugandan companies, promoting local content and ensuring that significant benefits from these projects are retained within the country.
Uganda’s oil and gas sector is thus poised to become a key driver of economic growth, with the government’s revenue share expected to range between 65%–80% according to projections by PAU.
As the country prepares for oil production, it is essential to ensure that the benefits of this sector are shared equitably among all stakeholders and that the revenue generated is used to promote sustainable economic development.