Uganda's Bunyoro Kingdom Demands 10% Of Oil Revenues

KAMPALA (Dow Jones Newswires), Nov. 28, 2011

Uganda's Bunyoro Kingdom wants the government to allocate it at least 10% of the proceeds from the oil and gas production to enable it fund development projects and address the negative effects of hydrocarbon exploration, a Kingdom spokesman told Dow Jones Newswires Monday.

The Kingdom cabinet passed a resolution last week to demand for 10% of the revenues ahead of the commencement of oil production in the oil-rich Lake Albertibe rift basin, according to Ford Mirima.

"The Cabinet has agreed on the amount of revenues Bunyoro, as the host of the oil deposits, should be allocated," he said "We hope the government will respect our demands."

The demand is the first time the Kingdom is officially stating the exact amount of oil revenues it wants from government.

With a population of around 3 million people, Bunyoro is home to block 2, where U.K.-based Tullow Oil is preparing to develop the country's first oil field at Kasemene. Tullow estimates oil reserves in the Lake Albertine rift at 2.5 billion barrels, with around 30% of the oil region explored so far.

According to Mirima, the kingdom wants to sign an oil sharing deal with the central government ahead of the production.

However, the Ugandan government has in the past insisted that oil is a national resource and any revenue-sharing deal between government and the Kingdom would have to be sanctioned by parliament.

According to analysts, the 10% revenue demand is "too much" and the government is not likely to cede such a huge share to the Kingdom.

"It (the demand) signals to other communities and may be a marker for other sorts of contestation," said Angelo Izama, an analyst with Uganda-based research group, Fanaka Kwawote. "The question also remains to be resolved if in fact Bunyoro Kingdom is a lawful representative of those people in the region."

The World Bank estimates that Uganda could earn as much as $2 billion a year from oil once production peaks in around 3-4 years.

According to Peter Lokeris, Uganda's junior energy and minerals minister, Bunyoro will only be entitled to royalties once oil production starts.

"The royalties will be allocated to the districts in the Kingdom to support development projects," he said, adding that there is no arrangement to share any other revenues apart from royalties.

Under the existing law, local government is entitled to around 17% of the royalties paid by oil producing companies.

The Kingdom has also been pressing the central government to provide it with legal rights over the oil revenues and activists have warned that failure to address the Kingdom's concerns could turn the basin into another Niger Delta.

Kingdom officials are slated to present their proposals to government this week.

Tullow has already agreed a joint venture deal with France's Total and China's CNOOC for $10 billion development project for three oil blocks, and the deal is awaiting government's approval.

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