President Museveni inaugurated the board members of the National Petroleum Authority (NPA), which will regulate the oil sector and the National Oil Company (NOC) that is tasked to be the commercial arm of government in the oil production process. Their inauguration comes two years after laws that will manage the sector were passed. At the inauguration on Saturday, President Museveni told the board members that it was now their responsibility to ensure the economy is developed.
The mandate of the NPA is derived from Section 10(1) of the Petroleum (Exploration, Development and Production) Act 2013. The Act, in part, reads that the NPA’s core function is “to monitor and regulate exploration, development and production of petroleum in Uganda.”
Ugandans expect nothing short of that. The expectation is that the authority will implement environmental standards, impose fines and penalties where necessary, ensure transparency in the bidding process and also monitor the activities of the oil companies.
Oil companies, world over, have the capacity to influence decision-making processes. George Stigler, a Nobel laureate economist, came up with ‘The Economic Theory of Regulation’. In it he described what he called Regulatory Capture. This, he said, was a state where the regulator fails to act in the public interest but rather in the interest of the companies it is supposed to be regulating. We expect the NPA to have Uganda’s interests at heart.
The first task the board has is to appoint an executive director and other members of staff that will operationalise the law. Uganda is yet to start oil production. The delay in issuance of production licences to Total and Tullow has been, partly, awaiting the setting up of the Authority. Now that there is a board, this process needs to be completed at the earliest.
Our commercial interests as a county must also be at the heart of the board members of the NOC. The company will operate like an oil company, but the core principle is for the country to benefit not individuals. Section 43 of the Act gives the company 10 functions emphasising the word “state”.
Recent developments in Brazil indicate how the state-owned oil company, PETROBRAS, was embedded with deep-rooted corruption in contracting and funding political activities to an estimated tune of $3.7 billion. Uganda is no stranger to corruption, even in state-owned enterprises. Considering that the NOC will participate in the oil sector, it will be under pressure to facilitate activities beyond its mandate.
The expectation of the country is that both NPA and NOC will remain independent of the influence from the powers that be and ensure transparency and accountability.
The issue: Oil authority
Our view: The expectation of the country is that both NPA and NOC will remain independent of the influence from the powers that be and ensure transparency and accountability.