A score card developed by the National Planning Authority (NPA) and the Africa Centre for Energy and Mineral Policy (ACEMP), an extractives sector policy and research think tank, has revealed that Uganda’s oil and gas sub-sector is performing reasonably well, way above average.
The Annual Petroleum Sub-sector Scorecard for Uganda was released in November 2016 and assesses the performance of the sub-sector along key selected components namely Institutional, Policy and Legal Framework; Reporting Practices; Safeguards and Quality Control; and Enabling Environment.
It gives the Petroleum Sub-sector an average score of 65.5 %, with the Reporting Mechanism component scoring the highest at 71.5%, and Enabling Environment coming last at 32%. Institutional, Policy and Legal Framework scored 66.9% and Safe Guards and Quality Control garnered 64.5%.
At the Institutional, Policy and Legal Framework level, the availability of the National Oil and Gas Policy (NOGP) for Uganda, 2008, the Oil and Gas Revenue Management Policy, 2012 and the various laws and regulations to guide the development of the sector contributed to the high score of that component.
The NOGP guided the various developments in the oil and gas sector including the development of the Petroleum (Exploration, Development and Production) Act 2013 and the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013. The Public Finance Act was enacted in 2015 and provides for the management of revenues accruing from petroleum activities. These pieces of legislation together with other relevant laws and statutes like those on Environment, Wildlife, Water, Land and Income Tax are being used in regulating the country’s petroleum sector.
There is a new institutional framework for the sector which separates the three aspects of policy setting, regulation of the industry and execution of the commercial interests of the state respectively. The establishment of the Petroleum Authority (PAU), to regulate the sectoral activities and the National Oil Company (UNOC) to manage the country’s commercial interests (including managing the State participation provided for in the respective Production Sharing Agreements) has helped to streamline roles of institutions in the management of the country’s petroleum sub-sector.
The Board of Directors of PAU and UNOC have been nominated and the positions of CEO and Director of UNOC and PAU have been filled. Senior and junior staff recruitment for the PAU and UNOC is currently ongoing.
However, the sector is not performing well regarding the creation of an Enabling Environment particularly on the two indicators that were considered: Citizen’s Engagement and Participation; and Value Addition and Sectoral Linkages.
Indeed there is limited national and community participation in oil and gas activities because there is no effective means to encourage community engagement and support. The participation of the communities should be in form of inclusion in the development and implementation of the strategic programs in the sector and local content. This is not embedded in any law, neither is it prescribed in the oil companies’ contracts, which are also inaccessible to the general public.
There’s need to expedite the development of the National Content Law such that companies are compelled by law to develop and implement community participation and national content programs. Disclosure of pertinent provisions of the Production Sharing Agreements relating to promoting local participation should also be made available to the public.
The linkage between the Petroleum sub-sector and other sectors of the economy is still very weak. This is partly because activities are not yet fully operationalized and therefore this could change during the development and production phases of the subsector as demand for inputs from other sectors increases.
NPA is mandated to issue a Certificate of Compliance to sectors whose investment plans and strategies are aligned to the National Development Plan (NDP) and Vision 2040. Accordingly, all Ministries, Government Departments and Agencies are required to prepare their respective sector policies and master Plans, which are consistent with the long term national development goals and objectives. Linkages to other sectors can be identified in these plans and policies.
The Public Finance Management Act empowers the NPA to compel sectors to prepare plans that are well aligned to the NDP so as to award the Certificate of Compliance. The NPA Act in section 7 (4), gives the Authority discretion to enforce this. The section is however silent on the need for strengthening sectoral linkages in the alignment of strategic plans to the NDP. The NPA has not fully consolidated and asserted its role as an ‘Authority’ to enforce sufficient oversight over Ministries, Government Departments and Agencies in the alignment of strategies, policies and plans.
Despite the above challenges, the subsector presents a wide range of investment opportunities ranging from joint ventures and farm-in arrangements in existing and new licenses; geophysical surveys, particularly multi-client seismic surveys in the unlicensed areas; oil and gas field services including operation and maintenance of rigs and other drilling related services; capital for the emerging infrastructure such as refining and transportation of petroleum commodities and products; service provision and contracts in the fields of engineering and infrastructure development to support petroleum resource development; procurement & development of a petrochemical industry; logistical services; construction and fabrication; waste management and treatment; and power generation using gas and crude oil by independent power producers.