As the clocks runs down on the production of the first oil drop in the country, President Museveni hopes to wring more oil law concessions from parliament to attract more sector investors.
Two weeks ago, government and oil sector investors agreed new timelines for the production of Uganda’s first oil despite cabinet-parliament-level disagreements over the existing oil laws.
President Museveni is unhappy with some clauses in the oil laws passed in 2013. He insists they are unfavourable to the interests of investors. To force a parliamentary rethink, the president has met with speaker of parliament Rebecca Kadaga to persuade her to push her MPs to review the laws and clauses that, in the president’s view, are turning away investors.
Museveni is rattled by the provisions that call for state participation and national content.
Last Friday, Kadaga, in a speech before MPs at a three-day conference on the oil and gas sector at Serena Lake Victoria resort, revealed titbits about her talks with Museveni.
“I had a meeting with the president and he told me that he is not happy with the local content laws because investors are not comfortable with them, he said, ‘I am going to send them back to you’ but I told him that; your excellency, you bring them back, we shall send them back to you the same way they are,” Kadaga said.
According to the minister of Energy and Mineral Development Irene Muloni, Museveni’s discomfort relates to the possibility of the laws holding back the production of the first oil drop.
“The law requires that for a company to do business in the oil sector, they should have at least 48 percent shareholding by Ugandans. Ugandans have to build capacity in order to own 48 percent shares [in] a company doing business of so many billions of dollars, but we don’t have the money,” Muloni told The Observer on the sidelines of the conference.
The entire process leading to the production of the first oil requires a capital investment of at least $20 billion (Shs 72 trillion).
“The president recognized that our own people may not have that capacity, and he does not want to hold back the work. Instead, he said, let us encourage our own people to partner [foreign investors]; when you are weak, you get a strong partner to support you,” Muloni said.
But Kadaga throws the blame squarely back on government, which she says has not done enough to prepare Ugandans to do business in the oil and gas sector. For instance, Kadaga says, the sector promises to offer more than 25,000 jobs for Ugandans but not enough training has been done for them to qualify for the jobs. She said the jobs may end up being taken by non-Ugandans.
“It is important to upgrade some of the institutions like [Uganda Petroleum Institute] Kigumba... we must find an avenue for Ugandans to train so that they are ready when the right time comes,” Kadaga said.
FIRST OIL DROP
To further underscore government’s reluctance, Kadaga pointed to the ever-changing timelines for the commencement of oil production.
“The first time we heard, it was 2014, then 2017, now 2023...eh!” Kadaga said.
But Muloni said that following an agreement reached two weeks ago between the sector investors and the government, the first oil drop is expected in 2022.
“We discovered that the investors were not ready; they were not well prepared [yet] we needed assurances from them about their capital investment. You are looking at about $20 billion, and about three years of preparation,” Muloni said.
“All the companies have agreed that by mid this year, they are going to tell us that we are ready; construction will begin, [and] if we can have many teams constructing the pipeline at the same time so that it gets ready quickly, and also the equipment gets fixed quickly at the wells in Hoima, we are giving ourselves a period of three years to see the first oil, that is why we are looking at utmost 2022,” she added.
Construction of the 1,445km pipeline from Hoima to the Tanzanian port of Tanga is expected to commence in July this year. For each barrel of crude oil that will be pumped, government will pay the investor (Total E&P) not more than $12.77 (Shs 45,972).