BusinessOil & gas

Players in the Oil Sector Divided on Local Content Strategy

The three day Oil and Gas conference hosted in Kampala this week was concluded on Thursday with a wide range of discussions in line with what Uganda must do to prepare itself for oil production in the Albertine region. 

The most contentious debate however centred on government’s plans to address the issue of national content in order for other sectors of the economy to benefit from the USD 20 billion worth of investment to be sunk towards oil and gas development.

The ideal strategy would be that such an unprecedented level of investment (in the case of Uganda) be leveraged to create as many opportunities for the ordinary Ugandan as possible.

Once the design studies are completed and final contracts for commercial production are signed, this Uganda anticipates to produce up to 30,000 barrels of oil daily.

President Yoweri Museveni maintains an ambitious target to have the first commercial oil flowing in the pipeline in three years’ time but Uganda so far has no law that clearly stipulates the scope of participation for locals in the oil industry.

If formulated, such a law should spell out the extent to which local firms engage in the industry through provision of much needed labour, logistical supplies, materials and services.

Some private sector players consider the Petroleum Exploration, Development and Production Act (2013) and the 2016 Petroleum Regulations as being shallow and unclear in defining what a local company is and their quota.

“There’s still much to be done if we are to deliver oil in 2020. The government hasn’t fully involved the private sector in the process. Our laws give a 48% quota to Ugandan companies doing business in the oil sector but dont define what a Ugandan company is,” Prof. Elly Karuhanga the Chairman of Uganda Chamber of Mines and Petroleum remarked during the course of the conference.

Loading...

A Ugandan company, according to the regulations doesnt necessarily have to be owned by Ugandan citizens. Although it provides for 70% employment to be awarded to Ugandans, there’s neither a threshold on shareholding nor foreign employment limits.

Karuhanga added; “The definition according to the law seems to be based on the country where a company is registred. You are confusing our businessmen.”

He also thinks the skilling of human resource required to do the oil work remains untackled as some of the standards require certification (for example truck drivers and crane operators). The implication of less qualified workers locally will be importation of human resource, unfortunately.

Former Energy Minister and currently Chairman of East Africa Gold Refinery Richard Kaijuka similarly opined that there’s lack of preparedness for local participation.

While he agrees that the 2020 production target is achievable, Kaijuka told ChimpReports in an interview; “Ugandans don’t want to be onlookers in oil production. Stating in the law that locals will have 48% participation isn’t enough.”

“We must deal with issues of capacity, access to money, issues of standards and policy. Most of our people don’t even understand how to submit requests or responding to tenders. So, the approach should be holistic.”

Kaijuka proposes that a special National Content Fund be established with initial capitalization of atleast USD 500 million to deal with issues of financing.

But the Chairman Private Sector Foundation Uganda (PSFU) Patrick Bitature argues that it’s time local contractors focused on increasing their competiveness instead of blaming the government.

“We asked for a law on local content (Buy Uganda Build Uganda policy) and government delivered it. We can’t now again cry foul asking that government ring fences everything for us in order to participate,” Bitature said in a panel discussion.

“About 1,500 drivers will be required to operate trucks. Should we wait for government to train these as well? This is business. You can’t get in the easier way.”

According to Bitature, private companies need to forge partnerships amongst themselves to reinforce their capacity in addition to addressing issues like good governance which often restrain them from accessing financing.

Among the 15 categories of goods and services exclusively ring-fenced by government for Ugandans in 2016 are; transportation, food, security, human resource management, fuel supply, civil works, catering and office supply.

But for local firms to qualify to provide these services, meeting health and safety standards, consistent supply, technical capacity and registering with the National Suppliers Database will have to be met.

Tags
Back to top button
Translate »

Adblock Detected

Please consider supporting us by disabling your ad blocker