I was quite tickled that Mr Tony Buckingham, the shrewd ex-mercenary and chief of Heritage Oil, is set to make £80million (Shs240 billion) from selling its lucrative oil fields in Uganda.

Buckingham has done a deal to flog his company’s oil fields in western Uganda to Eni of Italy for a cool $1.5 billion.


This story reminded me of what they said about the many Gold Rushes in America; that the people who made the most money from it were not the miners who went to mine, but the people who went to mine the miners.

One way to best understand this is to look at an industry that is very much on display every night near places like Speke Hotel – prostitution. Contrary to popular belief, the people who make the most money from prostitution are not the prostitutes.

...It is the same with Heritage. It’s making $1.5b not from selling the fields, but from selling its discovery. It is up to Eni (and Uganda) to try and make money from the oil, and they face uncertainties that Heritage no longer does.

Someone will have to sell (and service) the heavy equipment for drilling oil; to put money to finance the drilling; to sell insurance, name it. All these fellows will get paid BEFORE Uganda earns a dollar from selling a barrel of oil. And in the end, they will earn the most money because they will not be paying the heavy environmental price that comes with the oil business.

The real secret in making money in natural resources, therefore, is to play in the transferrable part of the business. An oil well is not movable. However, money earned from lending to oil companies and financing infrastructure is highly movable. Heritage Oil can now take its money to Shanghai, China, and invest in the booming property market there. Our oil wells, meanwhile, will remain in Bunyoro.