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News Article 5

National participation in the oil and gas sector

Since 2006, about 1.4 billion barrels of commercially recoverable oil reserves have been discovered in the Albertine Graben in Uganda. The discovery has generated excitement and high expectations from Ugandans seeking economic growth and the opportunity to benefit from this burgeoning industry. It is estimated that about USD 20 billion is expected to be invested in the oil and gas industry which includes the development of the necessary infrastructure. Whilst exploration is still ongoing, Uganda is now moving into the development stage.

As outlined in the National Content Policy 2017, the Government of Uganda is undertaking several initiatives to ensure direct and indirect participation of Ugandan citizens and enterprise in the oil and gas subsector so as to contribute to achieving lasting benefits for the country.

To put matters in context, the laws that govern exploration, development and production, refining, conversion, transmission and storage have been put in place. These laws are all in line with the National Oil and Gas Policy 2008, which states its primary goal as using the country’s oil and gas resources to contribute to early achievement of poverty eradication in Uganda. Among the purposes of the legislation is to promote the training of Ugandans and the transfer of knowledge and technology. The Ministry of Energy and Mineral Development has also outlined its National Content Policy goal as promoting the competitiveness of Ugandan labour and enterprise in the oil and gas industry.

Enabling legislation has therefore been put in place and the initial foundation prepared for Ugandan companies, registered entities and Ugandan citizens to actively participate in the oil and gas sector.

National Content

National content has two aspects to it.

  1. The level of use of Ugandan local expertise, goods and services, Ugandan companies, Ugandan citizens, business and financing in petroleum activities; and

  2. The substantial combined value added or created in the Ugandan economy through the utilisation of Ugandan human and material resources for the provision of goods and services to the petroleum industry in Uganda.

The International Oil Companies (IOC’s) licensed by the Government of Uganda, their contractors and subcontractors are required to give preference to goods which are produced or available in Uganda, and services which are rendered by Ugandan citizens, companies and registered entities. Stringent conditions are provided for such preference to be given.

Conditions for priority treatment to be given to Ugandan citizen, companies or registered entities include;

  • Must be competitive in terms of quality and be able to deliver goods and services in a timely manner;

  • Should have adequate resources and capacity to add value to the petroleum operations carried out by the IOC’s; and

  • Be approved by the Petroleum Authority of Uganda (PAU) and registered on the National Supplier Database.

PAU is mandated to develop a National Supplier Database (NSD) and monitor and evaluate the implementation of national content regulations against certain benchmarks. A company cannot provide goods, works or services unless it is approved and qualified to be on the NSD. PAU undertakes qualification of Ugandan companies, registered entities and foreign companies on an annual basis and is required to advertise the process in the newspapers and other electronic print media. The NSD is published by the 31st December of each year.

In exceptional cases, where the goods and services required are not available in Uganda, they are to be provided by a company which has entered into a joint venture with a Ugandan company with the approval of the PAU.

A Ugandan company is defined as one that has been incorporated under the Companies Act 2012, which provides value addition to Uganda, uses available local raw materials, employs at least 70% Ugandans, and is approved by the PAU. It is worth noting that certain goods and services have been ring fenced exclusively for Ugandan companies, citizens and registered entities. This however does not preclude such entities from providing goods and services not specified below. The services include:

  • Transportation;

  • 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;

  • environment studies and impact assessments;

  • communications and information technology services; and

  • waste management.

The potential for Ugandans to participate in the oil and gas sector is significant. However, certain impediments such as inadequate local capacity, lack of adequate preparation, high quality standards required by the IOC’s, and lack of access to financing may impair participation. It is therefore important to take a long term view of the industry and for expectations to be realistic and managed from the outset. It is also a wakeup call for all Ugandan companies, citizens and registered entities who wish to participate in the oil and gas industry to intensify their efforts and make adequate preparations. Interested participants should read the newspapers and look out for advertisements offering opportunities. They should also attend conferences and workshops organized by PAU, the IOC’s, contractors and subcontractors. These will be useful to educate the public and prospective bidders on national content requirements, procurement processes, requirements and performance standards.

 

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