Understanding the impact of a low carbon transition on Uganda’s planned oil industry

The report finds that the value of Uganda's upstream oil reserves has declined by 70% since 2013 due to structural changes in the global oil market, with a further $10 billion at risk in a transition aligned with the Paris Agreement. Current commercial terms are deemed insufficient for international oil companies like Total and CNOOC to reach a final investment decision, likely necessitating costly renegotiations for the Ugandan government. The authors argue that relying on oil for economic development is increasingly risky and recommend diversifying the economy, potentially through electrification, while incorporating climate transition and physical risks into public debt sustainability forecasts.

• The value of Uganda's upstream oil reserves has decreased by 70%, falling from $61 billion in 2013 to $18 billion by late 2020, primarily due to structural changes in the global oil industry and depressed long-term demand expectations.
• In a transition scenario aligned with keeping global warming well below two degrees Celsius (WB2C), Uganda's oil reserves face an additional $10 billion in value at risk, representing 56% of their current business-as-usual value.
• Expected returns for international oil companies Total and CNOOC under current terms are below the 15% hurdle rate in a business-as-usual scenario and fall below Total's 7% weighted average cost of capital (WACC) in a WB2C scenario, making the investment potentially value-destructive.
• To secure investment, Uganda may need to renegotiate commercial terms, which could cost the government $600 million or more in present value terms, such as by extending a 10-year tax holiday to upstream resources.
• Building the Kabaale refinery reduces the potential value of upstream oil reserves by $1.8 billion, with $1.4 billion of that loss accruing to the Ugandan government.
• Government value from the oil industry in a WB2C scenario is projected to be 60% lower than in a business-as-usual scenario and 90% lower than it would have been if the investment decision had been made in 2015.
• The Ugandan government faces significant contingent liabilities, including potential government guarantees for EACOP and refinery project financing totaling up to $4.9 billion, and potential early decommissioning costs of $1-1.5 billion.
• Further delays in reaching a final investment decision (FID) weaken the Ugandan government's negotiating position, as the value of reserves declines by an estimated $600-700 million per year.

APA

Huxham, M., Anwar, M., Strutt, E., & Nelson, D. (2020). Understanding the impact of a low carbon transition on Uganda’s planned oil industry. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/12/Understanding-the-impact-of-a-low-carbon-transition-on-Uganda-December-2-2020.pdf

Chicago

Huxham, Matthew, Muhammed Anwar, Eoin Strutt, and David Nelson. Understanding the impact of a low carbon transition on Uganda’s planned oil industry. Climate Policy Initiative, 2020. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/12/Understanding-the-impact-of-a-low-carbon-transition-on-Uganda-December-2-2020.pdf.

Wikipedia

{{cite report |last1=Huxham |first1=Matthew |last2=Anwar |first2=Muhammed |last3=Strutt |first3=Eoin |last4=Nelson |first4=David |title=Understanding the impact of a low carbon transition on Uganda’s planned oil industry |publisher=Climate Policy Initiative |date=December 2020 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/12/Understanding-the-impact-of-a-low-carbon-transition-on-Uganda-December-2-2020.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{huxham2020understanding, author = {Huxham, Matthew and Anwar, Muhammed and Strutt, Eoin and Nelson, David}, title = {{Understanding the impact of a low carbon transition on Uganda’s planned oil industry}}, institution = {Climate Policy Initiative}, year = {2020}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/12/Understanding-the-impact-of-a-low-carbon-transition-on-Uganda-December-2-2020.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }