Battle for national oil company shows strains in the sector

The National Oil Company (NOC) is the entity that will receive Uganda’s share of oil from the oil companies and trade in it. As the company, which carries Uganda’s participating interest in the oil sector it will be a highly profitable company, holding acreage and eventually being groomed to compete with international oil firms.

When Kitgum Woman MP Beatrice Atim Anywar received a call from a reporter to ask if her daughter had applied for a scholarship with an oil company, she laughed. “ I had no idea,” she said. At over six feet Anywar has a reputation as a fighter. She earned most of her stripes as “Mama Mabira”, the face of the 2009 campaign to save one of Uganda’s best-known natural rain forests.

At the time she was asked to respond to the question about her daughter and a scholarship being offered by the French company Total she held the portfolio as Minister for Natural Resources in the Opposition shadow cabinet. Her daughter, she later said, was not awarded the chance to study the oil and gas sector. The intercourse between Parliament and the oil companies is so far at arm’s length.

During the oil debate in November 2011, the House was piqued by an incident in which a letter written to Speaker Rebecca Kadaga in defense of Tullow Oil was presented on the floor by the Prime Minister, Mr Amama Mbabazi, before she could open hers. The sense that it is the government and the oil companies in a tight embrace, working hand in glove, explains the attitude of mistrust that ordinary MPs feel.

In the last seven days battle lines would be drawn. In a rather bizarre commentary on the distance ordinary Ugandans may feel from the process, an NGO alliance, led by Advocates Coalition for Development and Environment (ACODE), invited all Uganda’s 370 MPs, including Mama Mabira to the lakeside resort of Munyonyo to debate amendments to the country’s proposed oil Bills. She could not make the date but for a burial she was attending to in Northern Uganda.

Members summoned
On Monday, October 29, the ruling party summoned its members, which form a majority to do the same. Thus, in a space of a few days, two almost full plenaries (about 220 MPs attended the Munyonyo affair) would meet outside the ordinary sitting of the House to lock horns on the Bills. One facilitated by donors and civil society, the other by a government embattled by its record on transparency on oil as well as a continuous scandal over public finances.

An NGO lawyer said a junior government minister had remarked that the party caucus was meant to “detoxicate” what NGO’s want the Bills to reflect. At the centre of the debate, when it commences, will be how much power the government will have over the oil sector through the institutions the law will raise, but more so what sort of Ugandan national oil company will come to define the domestic industry.

“ That is the beef,” says MP Theodore Ssekikubo, who heads the Parliamentary Forum for Oil and Gas (PFOG). The National Oil Company (NOC) is the entity that will receive Uganda’s share of oil from the oil companies and trade in it. As the company, which carries Uganda’s participating interest in the oil sector it will be a highly profitable company, holding acreage and eventually being groomed to compete with international oil firms.

For example last week the Kanywataba Exploration area of Block 3A in the southern part of Lake Albert reverted to government. Some work had been done in the area, which has real potential.

Tullow, in fact, had applied for an extension of its exploration licence, arguing force majeure after its drilling rigs got damaged at sea and delayed its appraisal of some of its properties. However, in a statement, the Petroleum Exploration and Production Department of the Energy ministry said the area would now be licensed under the new law. Theoretically if Uganda had an existing NOC this acreage would now constitute a part of its assets and may yet still.

In the preceding weeks Mr Ssekikubo and others have said the government, through the Energy Minister, Ms Irene Muloni, and her Permanent Secretary, Mr Kabagambe Kaliisa, have gone on a charm offensive over the nature of the NOC.

Not a private affair?
“They want to create a national oil company under the Companies Act, which will effectively make it a private affair beyond the reach of Parliament,” he added. Other members of the Parliamentary Committee on Natural Resources say they have been herded into hotels and resorts and leaned onto support a private sector NOC, which, while fully owned by the government, can easily divest shares to private individuals and companies. A meeting with President Museveni was also held. He seems to favour a statutory corporation over the choices of his technical advisers.

In one recent lobbying effort, a team of Justice and Energy ministries officials met the committee in Lweza. “ The Minister told me they will fight this one. At least you should give us 10 per cent of the company,” said one committee member on condition of anonymity. “I can never be party to allowing a few privileged Ugandans to buy shares and thereby privately own these national assets,” Mr Ssekikubo thundered in a preparatory meeting of like-minded MPs backed by civil society technocrats. Last week PFOG launched its own lobbying effort.

It was the main engine for the invitation of the entire House to Speke Resort Munyonyo to “harmonise” their position on contentious matters in the oil Bills which largely revolve around the powers of the government through the Minister to act as the CEO of the industry as well as how open the sector will be. The group, which includes House members on the natural resource committee from various parties, want a fully State-owned statutory company and not a private one from the start.

The privatisation experience
They also want to prevent the NOC from ceding shares in the guise of raising capital for its activities. In the discussion about the merits of a statutory national oil company versus a private one many MPs recall Uganda’s experience with privatisation in the 90’s. The political message was that the process was rigged by privileged politicians and their associates who privately grew wealthy by gobbling up State enterprises derided as badly managed assets from the era when the State directly run businesses and enterprises.

“We have seen what has happened with National Housing and National Insurance Corporation amongst others,” Mr Ssekikubo told the group. “What starts out as partial privatisation ends up as complete handover.”

Recent controversies in government processes have not helped the mood around how Uganda’s NOC will be birthed. Last week another scandal, this time involving the privatisation of Uganda’s best-known copper mine, Kilembe Mines, was also emerging. Sources said tension had gripped the process as top decision makers wanted to abandon competitive bidding in favour of a direct award to yet another Chinese firm.

Thus, with political interference and a checkered record of “ broad daylight thieving”, the issue of what sort NOC carries the hopes of Ugandans will likely dominate debate in the House.

Some MPs have said even the current language of compromise in which a private company is held 100 per cent by the government and prevented from selling its shares for a period is too risky. It has not helped that since Uganda discovered oil in 2007 (3.5 billion barrels so far) the relationship between Ugandan companies and the oil companies has remained opaque. Mr James Karama, who coordinates strategy for oil and gas at Stanbic Bank, says the lack of demand forecasting in which the requirements of the sector are made readily available has limited access to the sector. It has also allowed an attitude of familiarity to creep in the culture of the companies.

It’s against this background that this week’s debate on regulation will take shape especially on how a Ugandan NOC will eventually emerge.

Izama is a writer, journalist currently Open Society Fellow studying the political economy of oil and gas in East Africa