Seven years of ‘Oil for Development’ aid from Norway has significantly boosted the resource management capacity of Uganda’s Petroleum Exploration and Production Department (PEPD)—but environmental management lags far behind, with serious weaknesses in the National Environment Monitoring Authority (NEMA) and its partner agencies, according to a recent evaluation of the programme.

PEPD has demonstrated “good leadership and coordination” of Norwegian aid and “effective internal organisational development,” the evaluation report observes.

The Ministry of Finance, Planning and Economic Development is also praised for “good leadership so far” and “good cooperation [with] subordinate institutions” on issues relating to tax and revenue management.

But the report finds that government departments responsible for protecting Uganda’s environment suffer “absence of political leadership.”

The “initial capacity and internal coordination” of NEMA and other agencies was “too low,” the report finds. Environmental protection has been hampered by the “large number of environmental directorates involved . . . weak coordination [and] organisational development.”

Thus, Norwegian aid to Uganda in environmental management of oil has so far been “not effective,” according to the report.

Management of drilling wastes is highlighted as a particular problem.

“The evaluation team observed efforts to stock pile wastes in containers and temporary waste pits by the oil companies,” page 66 of the 222-page report notes. “It appears that this will continue to increase the outlays of the oil companies which will be deducted from taxable incomes as ‘cost oil.’”

A global effort

The evaluation study, Facing the Resource Curse: Norway’s Oil for Development Program, is not confined to Uganda, but reports overall on the Oil for Development (OfD) programme that Norway launched in 2005 as a major plank of its international aid around the world.

Building on Norway’s much vaunted success in harnessing its own oil resources, the programme was intended to help developing countries avoid the ‘resource curse’ by encouraging “economically, socially and environmentally responsible management of petroleum resources which safeguards the needs of future generations.  It is much the largest, oil-focused aid programme in the world.

OfD officials and publications emphasise, however, that the programme does not aim to promote a “Norwegian model” but, rather, enables developing countries to learn from the experiences of others and to develop models that work best for them.

By 2012, the programme had spent around 1.5 billion Norwegian Krone (US$ 280 million) worldwide. Currently, eight nations are treated as ‘core countries’ and a dozen more receive some level of support.

The evaluation report is based on fieldwork and studies in seven of the core countries, including three in Africa: Ghana, Mozambique and Uganda.

Uganda is not only a core country, it also topped the list for OfD spending in 2011 with disbursements of 48.8 million Norwegian Kroner (US$ 9 million).  The total budget for the current cooperation agreement, from 2009-2014, is 80 million Kroner (US$ 14 million.)

Much of that money goes to pay for Norwegian experts—mostly from Norwegian government agencies such as that country’s Petroleum Directorate—to deliver advice and training to Ugandan civil servants.   Much is also spent on sending Ugandan officials to Norway on study tours and short training courses delivered by Petrad, a Norwegian state-owned training institution.

In addition, the programme funds seminars, workshops and research studies in Uganda. It funded a feasibility study by a private consulting firm, Foster Wheeler, of building an oil refinery in Uganda.  Completed in 2010, that study found that a 60,000 barrel per day refinery would be economically viable, with an internal rate of return on capital of around 30%.

OfD also helped to facilitate the drafting of Uganda’s Oil and Gas Policy, Petroleum Revenue Management Policy, the 2012 upstream and downstream petroleum bills, and the 2012 Public Finance Management Bill.

OfD is spread across three, “pillar” areas: oil resource management (which in Uganda has fallen mainly to PEPD), oil revenue management (mainly handled by the Ministry of Finance) and environmental management (responsibility for which is divided across several government bodies, with NEMA taking the lead).

In Uganda, the programme has worked longest—and, apparently, most successfully—with PEPD on the resource management pillar.

As a ‘bilateral’ (government-to-government) aid programme, OfD works mainly with public sector (government) partners.

However, funding support is also given to the Revenue Watch Institute for its work globally on promoting understanding and debate around oil revenue management, and to the Worldwide Fund for Nature (WWF) for research and advocacy efforts on environmental protection in relation to the oil industry.

Governance concerns

The evaluation report on the seven year global programme is mainly positive.  OfD is innovative, it says, and has “largely succeeded” in a “more strategic and profound” approach than earlier Norwegian aid in the petroleum sector.  It should remain a priority for Norwegian aid, and be expanded “to the extent necessary” to meet growing demand from emerging oil-producing countries.

Some weaknesses are highlighted, however.

Notably, “OfD has generally not given governance problems sufficient attention.”  This, the report notes, is partly because “the pillar approach creates rigidity.”  Norwegian advisers providing technical assistance “have limited knowledge of overarching issues like governance, anti-corruption, gender, non-state actors in oversight and accountability.”

Ghana is acclaimed as a “positive exception” in not presenting overarching governance problems.  By contrast, general governance indicators—such as Transparency International’s corruption perception index—have worsened in both Mozambique and Uganda since the OfD programme began.

Thus the report recommends that “Good governance should be a visible, cross-cutting concern in core country programmes.”  OfD should also “concentrate on states where the potential for good governance and pro-poor policies are greater, i.e. countries where predatory structures have not yet established themselves or are being challenged.”

Another weak link has been working with media, the report says.  “OfD does not have a specific vision regarding how it might strengthen transparency and accountability through media support.”

Also recommended is a greater focus on South-South cooperation and “peer learning.”

Report by NY

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