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Analysis: New law fails to ease oil concerns in Uganda


IRIN NEWS

KAMPALA/NAIROBI, 13 December 2012 (IRIN) – Uganda’s parliament recently passed a law to govern the exploration, development and production of the country’s estimated three billion barrels of oil, a resource whose extraction will directly affect the livelihoods of tens of thousands of people.

While the law streamlines the burgeoning industry, analysts have raised concerns over transparency and over who controls the sector.

“The new law helps set clear guidelines under which the oil sector is to be run and managed, and makes clear who is in charge of what roles,” said Tony Otoa, director of Great Lakes Public Affairs (GLPA), a Uganda-based think tank focusing on oil and governance. “However, there are some concerns about transparency and too much power within the oil industry in the hands of the president.”

The bill was passed on 7 December after weeks of wrangling over its controversial Clause 9, which gives the energy minister wide-ranging powers, including authority over the granting and revoking of oil licenses, negotiating and endorsing petroleum agreements, and promoting and sustaining transparency in the petroleum sector. Many members of parliament (MPs) felt these powers should be held by an independent national oil authority.

“Essentially, the standoff, which has ended, was about the withdrawal of trust from a government that is battered by corruption scandals. Also the way the cabinet operates is that, in the past, the feeling has been that some key ministries, like finance, are effectively run by the presidency after being stuffed by yes-men or -women. The pushback against Clause 9 also comes as the Central Bank opened its vaults to a large withdrawal in 2010 [US$740 million to buy six fighter jets] only for approvals to be sought retrospectively,” said Angelo Izama, a Ugandan journalist and oil sector analyst.

“Loss of trust”

“This loss of trust is behind the resistance to greater control by the executive,” he added. “The executive has not been a bad shepherd of the process so far. Uganda’s negotiating position has been tougher with the oil companies, ironically, without the oversight of parliament. However, public scandals elsewhere have negatively affected the ability of the president to convince lawmakers – especially of his party – that he means well.”

A number of donors – including the UK and Ireland – recently suspended aid to Uganda following allegations of deep-rooted corruption in the Office of the Prime Minister. The prime minister, the former energy minister and the foreign affairs minister were all accused of taking kick-backs from oil companies in 2011, charges that remain unproven but that nevertheless damage the reputation of the government.

“The country lacks trust in the state… Institutions and officials have lost legitimacy, and for such an important bill to vest too much power into a political appointee is a recipe for disaster,” said Stephen Oola, a transitional justice and governance analyst at Uganda’s Makerere University Refugee Law Project.

“Granting and revoking licenses and negotiations are technical in nature. We need an independent commission or authority made up of people of good competence, technical ability and experience, and good morals to guard our oil,” said Frank Gashumba, a local businessman and social activist.

Proponents of Clause 9 say licensing powers are safer in the hands of the cabinet than under an oil authority. “The authority is open, easy to bribe and manipulate. Cabinet is bigger than the authority – members of the executive are answerable to Ugandans because they are elected leaders,” said Kenneth Omona, a ruling party MP.

Those opposed to it say they will challenge the law, which was passed with 149 votes in favour and 39 against; some 198 MPs did not turn up to vote.

“The fight is not complete; the passing of the bill is liable to be challenged in courts of law,” said Theodore Ssekikubo, ruling party MP and chair of the parliamentary forum on oil and gas. “If we fail to go to court, we shall subject the matter to a referendum for all Ugandans to pronounce themselves on this strategic resource. We want to ensure transparency and accountability in the oil sector.”

Transparency

There are also concerns about the law’s confidentiality clause, which limits the amount of information accessible by the public.

“The law is lacking transparency – it imposes confidentiality on officials working within the sector, even after they leave office, so there is no opportunity for whistle-blowing or for the public to have access to information on, say, production-sharing agreements,” GLPA’s Otoa said.

He noted that Uganda still hasn’t joined the Extractive Industries Transparency Initiative (EITI), an international scheme that attempts to set a global standard for transparency in oil, gas and mining, further compounding the sector’s lack of transparency. As a member of the EITI, Uganda and oil companies involved in the country would be required to publish all payments and revenues from the industry.

While Total and the China National Offshore Oil Corporation (CNOOC), two of Uganda’s major oil partners, are listed on Wall Street and are therefore subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act – which requires disclosure of payments relating to the acquisition of licenses for exploration and production of oil, gas and minerals – the Irish firm Tullow Oil, another of Uganda’s main oil partners, is not under any similar obligations.

“I am worried we [legislators] and the public can’t access and scrutinize these agreements. You can imagine the recently negotiated and signed oil agreements have not been accessed by the public, not even by members of parliament,” Beatrice Anywar, former shadow energy minister, told IRIN.

The impact of the oil sector has so far been most acutely felt by communities around Lake Albert, thousands of whom have had to move – some willingly and some forcefully – to make room for an oil refinery, which is expected to take up 29sqkm and displace some 8,000 people.

Land issues

“The government is prosecuting the refinery resettlement by the book. However, managing public expectations and the process of multiple decision makers in Uganda’s complex land legal system [Uganda has multiple land systems, including customary, leasehold and freehold] has contributed some volatility to the process… What is adequate compensation? And who determines that? Is it the market or should this be done by the government?” said journalist Izama.

“As a partner to the oil companies, it’s questionable too if the government can make the best decisions for the affected people as it would look to keep project costs fairly low,” he continued. “It is still a dilemma which is jurisprudential as well as political.”

He noted that much of the oil is in game reserves and a sensitive basin with lakes, rivers and a rare biodiversity, and borders the Democratic Republic of Congo, which could also pose challenges for peaceful production; there has already been some tension between the two countries over their boundaries within Lake Albert.

“The process of consensus-building is still weak, and regardless of how it’s arrived at, displacements will create uncomfortable realities, including land and job pressure.”

According to Otoa, Uganda’s lack of a comprehensive land policy makes compensation issues more complex. “We need clear land policies to ensure people are properly compensated – there is a Resettlement Action Plan in place, but it has not been implemented, and a draft land policy has not been actualized, leaving these communities vulnerable,” he said.

He noted that the lack of education among the local population, both in the oil-rich areas and the rest of the country, had contributed to the continued problems in the sector.

“We have focused too much on educating MPs on the implications and importance of good oil governance. We need to move to people-centred approaches and encourage dialogue in the public sphere, which will lead to people demanding accountability from their MPs and the government,” he added.

Ultimately, Izama said, responsible actions by the government will be the difference between Uganda’s oil making a significant impact on the country’s economy or causing conflict and greater poverty.

“Pressure on public institutions prior to commercial oil production is an effective way of counteracting the resource curse. If this public engagement falters, if the transition [from President Museveni to his successor] is volatile, some of the scenarios of the so-called oil curse are possible,” he said. “Overall the tensions are high, but responsible actions by public and political institutions like the past debate show progress is possible.”

Uganda Oil Contracts Cloaked in Secrecy


Voice of America

By Douglas Mpuga

May 26th, 2012

This is Part Two of a five-part series on oil contracts in Uganda
Continue to Parts:     1 / 2 / 3 / 4 / 5 

In Uganda, critics argue for public access to details of contracts between government and oil companies.

When billions of barrels of oil reserves were found in Uganda five years ago, the discovery seemed like a gift from heaven to many in this East African, poor, landlocked country.

But as Douglas Mpuga reports in this first of a five- part series, Uganda’s oil sector has so far been characterized by high level secrecy that critics say is unlawful.

Oil wells are expected to start pumping within five years, and bring along with it about two billion dollars per year, according to government officials.

Many analysts are hopeful that could propel Uganda into the strata of middle-income countries, where few sub-Saharan African countries rank. A refinery will be built – providing revenues for improved roads, bridges and other infrastructure.

Three foreign companies are involved in oil exploration in the country: UK-based Tullow Oil, which has been operating in Uganda since 2006, and two other companies to which it has sold part of its investments — France’s Total SA (TOT) and China’s CNOOC Ltd.

The government has signed deals with the companies.  But few Ugandans know what is in the agreements.  The government insists that it will not release details of the agreements citing confidentiality clauses that bind it and Parliament from disclosing their contents to third parties.

Two senior Ugandan journalists took government to court seeking this information after the failure of repeated calls for the release of the details.

“We are suspicious why the government wants to handle this oil exploration program with a lot of secrecy,” said one of the journalists, Charles Mwanguhya Mpagi, the political editor of The Daily Monitor newspaper.  “We are looking at examples such as Ghana where they have their agreements on the internet. We are looking at Norway which has this information available.”

According to Mwanguhya Mpagi: “We suspect government has always been reluctant to share information with the Ugandan public. The other thing we have been told, from what has leaked out, is that the agreements are not entirely bad. So we are puzzled why the government is reluctant.”

But the legal process has not been smooth:  a lower court dismissed the journalist’s initial request but now the High Court may consider the appeal.

“Our initial petition to the court was not limited,” said Mpagi, adding “What we asked government to do was to rely on the constitution to be more transparent in its dealings with the oil industry, what agreements it is entering into with the prospectors.”

“We lost in the lower court, “ he continued, “because the magistrate wasn’t convinced that accessing this information would benefit the Ugandan public. But he forgot that we are journalists who would share this information with the public. This is what we intend to push for in our appeal.”

The journalists’ campaign has been boosted by four organizations seeking to become party to the case. Describing themselves as friends of the court, they say they are advocating for the right of the public to know about national and regional energy policies that aim in part to help eradicate poverty.

Meanwhile, Ugandans wait for the day when the first barrel will be exported.

Uganda: Parliament irrationality and oil contracts


The Independent

BY DENIS MUSINGUZI

March 11, 2012

It is painfully clear the problem is not lack of laws and policy frameworks but lack of implementation efficiency.

The signing of the PSAs on February 3, 2012 by Tullow, CNOOC, Total and government despite standing court cases and resolution by parliament slapping any oil transactions until comprehensive legislation is made, has attracted a lot of uproar. At the height of it has been the parliament which accuses the government of contempt of parliament, and a host of other civil society organizations, both of which have threatened to petition Ugandans, including pregnant mothers in hospitals contesting against the agreement.

Their agitation sounds credible at first since the discovery of 2.5 billion barrels of oil in the Albertine region in western Uganda holds potential for significant economic transformation for Uganda. Estimated at $74 per barrel, it means the oil is worth $148 billion, the money believed to be enough to run the present national budget for about 42 years without donor funding. This certainly turns the oil management into a hotspot; poor governance of the oil wealth is globally known to evoke a curse.

On the second thought however, Andrew Mwenda has provokingly presented the argument, that by blocking the signing of oil contracts the 9th Parliament will not improve but rather worsen the nascent sector, in such a profound manner that makes one to deeply rethink parliament’s posturing at fighting corruption. It should be recalled that parliament made the resolution following bribery allegations based on unfounded documents. Incidentally, Mwenda’s candid criticism of parliament comes at a time when public faith in the 9th Parliament has been greatly reduced by their unanimous and shameless acceptance of Shs 103 million each, to purchase sleek cars.

The acceptance of the money in the name of performing their “public” role, with utter disregard of the needy civil servants such as doctors and teachers who even do not enjoy a small portion of the hefty benefits and privileges enjoyed by parliamentarians makes one doubt their resolve at fighting corruption. The possibility that parliamentarians are fighting to leverage their personal and not public benefit is evident; the likelihood of them being purchased is clearly high. It is helpful to recall that the majority Constituent Assembly delegates who provided constitutional term limits are the same who lifted them, barely ten years later, at a shameful price of Shs 5 million, without any substantive justification.

What makes one even all the more suspicious is that the MPs’  posturing is not about the merits and demerits of the PSAs, but more insignificantly about making enabling legislation for leveraging public benefits from oil. I say insignificantly because any keen Ugandan is painfully aware that Uganda’s problem is not lack of relevant laws or required policy frameworks, but lack of implementation efficiency in the delivery of public goods and services, which parliamentarians are quiet about. Uganda has in fact become a cemetery of dead laws, dusted in law books, never in reality, but scarcely applied, if not selectively…Read more.

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