A critical intertemporal analysis of Uganda's fiscal regime in the energy transition era: Are Uganda's upstream projects still viable?

Abstract

While countries in the different parts of the globe are moving towards a low-carbon economy, Uganda is focused on developing its oil and gas sector. Nevertheless, the country has various renewable energy projects but this chapter will focus on the upstream projects. With the Uganda project on the brink of production and licensing of subsequent projects, this chapter presents a critical intertemporal analysis of Uganda's fiscal regime from the Government perspective and its impact on the planned Oil projects. The study is the first to present an economic evaluation according to the planned development and cost structure of the projects with the analysis seeking to determine the possible reaction of the investors utilizing the range of the fiscal terms applied within the country from 2004 to 2012. The study is the first to present an intertemporal analysis of Uganda's fiscal regime and further highlights the fiscal incentives availed to date and their impact on the project viability in the new oil price environment. The study employs both a qualitative and quantitative analytical approach to critically assess the fiscal elements prevalent in light of the investment incentives provided. The chapter presents a theoretical fiscal regime with progressive features to reduce the fiscal burden on marginal fields and provide more responsiveness of the Government revenue to project profitability regardless of the level of production. Uganda's Fiscal regimes have increased in the level of regression over time. This, on the one hand, provides stable and secure Government revenues; however, on the other hand, it limits the Government takes on the project upside due to high resource prices or reduced project costs. The theoretical regime was sighted to be progressive with regard to the Buliisa and KF-KT projects. However, in line with the theory, it imposed a higher fiscal burden on the KF-KT project due to its lower profitability. The Government, therefore, should endeavour to reduce the non-price risks within the country and carefully monitor the resource development.