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Substance over form: Uganda reaps big from National Content Policy

Tullow Oil staff taking readings

Tullow Oil staff taking readings

Women lie, men lie, but numbers don’t lie!

The impressive figures posted by Uganda’s oil and gas project on national content are a testament to the steel of the 2008 National Oil and Gas Policy. No doubt, it has formed the benchmark of the new National Content law.

At the end of June 2023, 12,949 people, were employed in Uganda’s oil and gas sector. Of these, 12,172, (94 per cent) are Ugandan nationals, with 3,871 workers who come from the regions within which the projects are being constructed. At the peak, between 2024 and 2025, the projects are expected to reach an estimated direct employment of more than 13,000 persons.

The Petroleum Authority of Uganda (PAU) put in place a National Oil and Gas Talent Register (NOGTR) to promote employment in the sector. At the end of June 2023, there were 7,792 (6,109 male, 1,683 female) talents and 119 companies registered on the NOGTR.

To supply any goods and services to the oil and gas sector, an entity or individual is required to register on the National Suppliers Database (NSD). The NSD facilitates the authority to monitor and regulate the provision of goods and services in the country’s oil and gas sector.

As of June 2023, at least 2,696 entities from 42 countries were registered on the NSD. Of these, 2,111 are Ugandan entities. In terms of capacity building, over 190 Ugandans have been trained in first-class universities including Ivy League universities in the world.

Over 9, 200 have been trained in welding, scaffolding, instrumentation, heavy goods vehicle driving, plumbing, electrical, heavy machine operation, oil and gas production, pipe fitting, rigging, quality control, health, safety and environment (HSE), and general construction works, among others.

We currently have more than 2,172 small and medium enterprises (SMEs) that underwent capacity-building training in procurement, book-keeping, HSE, contract financing, business formalisation, and financial management to meet the high industry standards. These are the inputs and, therefore, the results will be seen in the short and long terms. However, what is undoubtedly clear is that the policy has started bearing tangible benefits.

The National Content Policy is underpinned by the principle of substance over form. As such, there’s an emphasis on domiciliation and corporate presence. The second strategic decision was to create the Uganda National Oil Company (UNOC) as a champion of national content. The UNOC is the first layer of national content, holding the biggest interests for the country in terms of its commercial interests.

In the upstream (initial stages of oil and gas production), UNOC has a back-in of 15 per cent shareholding, where it is a joint venture partner in the development of the East African Crude Oil Pipeline (EACOP) and is the lead developer of the Kabalega Industrial Park, which will host the refinery, airport and a petro-chemical- based industrial park.

Thirdly, the policy requires that priority for goods and services is given to Uganda companies, a joint venture between Ugandan and international companies, or an international company in that order of precedence. At least 16 key areas of supply of goods and services have been ringfenced for only Ugandan entities.

These include transport and logistics, security, foods and beverages, hotel accommodation and catering, human resource management, office supplies, fuel supply, land surveying, clearing, and forwarding, crane hire, locally available construction materials, civil works, supply of locally-available drilling and production materials, environment studies and impact assessment, communications and information technology services and waste management.

In the event of limited or no capacity, the policy encourages the formation of joint ventures to enable technological transfer. To put this in perspective, from 2017 to 2022, almost 40 per cent of procurement contracts, valued at $1.8bn were granted to 465 Ugandan companies. Among these are 41 community-based companies, which have been awarded contracts worth $2.3 million.

This attention to detail and the implementation mechanisms have guaranteed that all sector players appreciate that Ugandans have a role to play in advancing its oil and gas sector through the promotion of local content.

Uganda’s National Content Policy has become a benchmark internally by other sectors like the new National Content law but also by other new oil and gas producers like Guyana. It’s not surprising to find Ugandans as expatriates in other countries or affiliates of international companies operating in other oil and gas-producing countries.

The new momentum is to address the challenges which include contract negotiations by local companies and individuals, lack of the required experience to execute such huge contracts, delayed payments to local contractors, and taxes. But as the Baganda say, ‘gakyaali mabaga – it’s just the beginning’.

The writer is the director, Legal and Corporate Affairs at the Petroleum Authority of Uganda.

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