PRESENTATION TO JOURNALISTS AT ACME, KAMPALA ON 7TH FEB 2012

By

Shem ByakagabaManaging Consultant

Lantern consult InternationalContacts: Mob. +256 772 433440

Email: shemb@lanternconsult.com

Presentation outlineIntroductionConstitutional provisionsThe National Oil and Gas PolicyThe Petroleum (Exploration, Development and

Production) Bill 2011Institutional arrangementsLicensingThe Oil (Refining, gas processing and conversion,

transportation and storage) Bill 2011.General comments

IntroductionUganda has discovered huge commercial

quantities of oil and gas which has attracted attention of national and international actors.

The country has made many strides in exploration and production is about to be undertaken.

The legal framework is still weak, i.e., the Petroleum (Exploration and Production ) Act, Cap 150.

Uganda passed the National Oil and Gas Policy which is yet to be enabled by law.

Article 244 of the constitution 244(1) Subject to clause (2) of this article,

Parliament shall make laws regulating:a.The exploitation of minerals,b.The sharing of Royalties,c.The conditions of payment of indemnities

arising out of exploitation of minerals andd.The conditions regarding the restoration of

derelict lands.

Constitution contd…Art 244(2) provides that:

Minerals and mineral ores shall be exploited taking into account the interests of the individual land owners, local governments and the Government.

The national Oil and Gas Policy, (NOP) 2008Article 5(1) lays down the guiding principles in

the development of the oil and gas in Uganda;a)Using finite resources to create lasting

benefitsb)Efficient resource managementc)Transparency and accountabilityd)Competitiveness and Productivity

NOP contd…

e)Protection of the environment and conservation of the Bio-diversity

f)Spirit of cooperationg)Capacity and institutional building.NB: The objectives of the policy are

consistent with the guiding principles of the NOP

NOP contd..The NOP provides for the following regulatory

framework;CabinetMinistry responsible for oil and GasThe Petroleum Authority of Uganda (PAU)National oil CompanyMDAsCivil society and Cultural institutions

The Petroleum (Exploration, development and Production) Bill 2011

The long Title provides inter alia;The Act to give effect to Art 244To regulate petroleum exploration,

development and productionTo establish the Petroleum Authority of

UgandaTo establish the National oil companyTo regulate the licensing and participation of

commercial entities, etc

The purpose of the ActThe purpose of the Act is to operationalise the

National Oil and Gas Policy by:Creating a conducive environment for the

efficient management of petroleum resourcesEstablishing institutions to manage the

petroleum resourcesRegulating petroleum activitiesProviding optimal social economic benefitsEnsuring public safety and protection of public

health and environment.Supporting the development of state participation

and national content.

Petroleum rightsS.5 provides that subject to Article 26 of the

Constitution the entire property in, and the control of, petroleum in its natural condition in, on or under any land or waters in Uganda is vested in the government on behalf of the republic of Uganda.

S.6 provides that petroleum activities in, on or under any land or waters in Uganda or subject to Ugandan jurisdiction shall not be conducted without an authorization, license, permit or approval issued in accordance with this Act.

Agreements with governmentsS.7 provides that government may enter into an

agreement in the respect of the following matters;

a)The grant of a license b)The conditions for granting or renewing a

licensec)The conduct by a person of petroleum activities

on behalf of any person to whom a license may be granted.

d)Any other matters incidental or connected with the above.

Institutional arrangementsS.10 – 13 establish the directory of petroleum.

S.14 -47 establish the Petroleum Authority of Uganda.

S.48-52 establish the National Oil Company

Comments on institutionsThere is emphasis on the office of the

Commissioner who is an appointee of the president.

Ss.18 & 19 are contradictory, they provide for the independence of the Authority but subject it to the direction of the minister hence providing for political influence and possible manipulation.

There are no sufficient details on the National Oil Company, i.e., shareholdership, directorship, functions, management and the nature of company.

Comments..The separation in the mandates and

functions between the minister, the directorate and the Authority is not well articulated hence a recipe for conflicts and/or duplication.

There seems to be an inconvenient marriage between different legal regimes or jurisdictions.

LicensingThe Bill in Ss. 55 – 168 provides for;

Reconnaissance permitsPetroleum exploration license and

Petroleum production licenseProduction permit

State participation and National ContentSs. 126-129 provide for areas of state

participation and national content which include;

Participation in petroleum activities.Provision of goods and services by ugandan

entrepreneurs.Training and employment of ugandansTraining and technology transfer

Information and documentationAll petroleum data generated under this Act

shall be owned by the state except;a)Data acquired under reconnaissance permit

orb)Data not generated under a cost recovery

regimeS.154 provides that all data submitted to the

minister by a licensee shall be kept confidential….and shall not be disclosed to third parties by any party.

Payments Ss 156-161 provides for the following payments;

Royalties on petroleumAnnual fees (annual rental plus training and research)

Signature bonus

The oil (Refining, Gas processing and conversion, transportation and storage) Bill 2011 This Bill provides for regulation of oil

refining, gas processing and conversion, transportation and storage of petroleum and also establishes institutions for policy formulation and management.

The Bill provides for licensing, health, safety and environment and state participation.

General issuesThere is need to distinguish between the

licensing and the regulatory authorities to avoid mandate overlaps and possible conflict of interest.

The two Bills do not sufficiently provide for detailed environmental requirements. These may be covered under the current environmental laws which are inadequate in as far as they were not cognizant of oil exploration and production.

General contd.S.154 emphasizes confidentiality. How can it

be reconciled with transparency requirements? How do third party actors get information to hold the system accountable? Other than the procedure under the Access to Information Act, there is no specific procedure for disclosure of information under this Bill.

There is no provision for competitive bidding on licensing . Will PPDA Act apply?

Comments contd..The role of parliament is conspicuously absent!Whereas the policy provides for the role of civil

society and cultural institutions, the two Bills are silent.

There is no provision for stabilization clauses. Will these be dealt with in the agreements? Best practice requires to have them regulated in the Act.

It is hoped that the fiscal terms will be spelt out in a separate detailed Revenue Management law.

THANK YOU FOR YOUR ATTENTION

DESTINY IS IN OUR HANDS

GOD BLESS UGANDA!!!