An Assessment of the Economic Viability of Primary Midstream Oil Projects in Uganda:

Abstract

Many governments undertake some form of economic viability analysis to decide whether a proposed project is a good use of public resources. A project is economically viable if the economic benefits of the project exceed its economic costs, when analyzed for society as a whole.1 The economic costs of the project are not the same as its financial costs, externalities and environmental impacts should be considered. Externalities (positive or negative) are economic impacts that affect persons who are not necessarily part of the project scope. The economic benefits are a measure of the value the project will deliver to society as a whole.2 The revenue a project will generate is usually a lower-bound estimate of its economic benefits; however, benefits can be much higher than revenues. In addition, the project may enhance regional economic activity and quality of life for the people living in the vicinity of the project. Similarly, the value of education at local schools should be measured by the enhancement in the lives and prospects of the children who attend those schools, even if no school fees are charged. Economic viability analysis can also include a cost-effectiveness analysis to determine whether the project is the lowest-cost alternative to achieve the identified benefits. This chapter set forth the background of the study in a historical, conceptual and contextual manner. This was achieved through the research questions that were formulated by the researcher and that were based on the objectives of the study. The chapter also put forth the scope of the study with regards to geological location, time and knowledge. The chapter concluded by citing the significance and justification of the study.