How local suppliers can tap into Shs7 trillion oil deals
Local suppliers, who want to to benefit from oil and gas projects must ensure that they have sufficient capacity. Photo / Michael Kakumirizi
What you need to know:
- Local suppliers must ensure they have the required capacity and avoid overpricing goods and services, and delay projects to fully benefit from the $2b (Shs7.3 trillion) worth of contracts
Between Sinopec and McDermott consortium, there is $2b (Shs7.3 trillion) worth of contracts.
The money will be funding different projects and activities leading to production of first oil, expected in 2026.
The $2b in contracts, according to Petroleum Authority of Uganda (PAU), is meant for the provision of engineering, procurement, construction, and commissioning services for the Tilenga project, an onshore oil field development.
Formal contract award for Tilenga, which was approved by other joint partners, including CNOOC and Uganda National Oil Company (UNOC), is operated by TotalEnergies on behalf of Joint Venture Partners.
As implementing contractors, Sinopec and McDermott, must subcontract part of the deals to local suppliers to supply goods and services along the value chain, including oil fields in Buliisa and Nwoya districts.
Mr James Musherure, while speaking at the quarter one supplier engagement workshop post-Central Processing Facility construction scope, 2025, said there is assurance resulting from contract award negotiations that local suppliers will be part of the “significant” entities to be subcontracted.
“Local suppliers will significantly benefit from the $2b worth of contracts. It is part of what we negotiated,” he told participants.
Sinopec senior public relations officer, communications and national content Solomon Hans Ruyonga, said so far, about $400m (Shs1.5 trillion) has been subcontracted to local companies for Tilenga.
The Tilenga project is part of the development phase, consisting of nine onshore oil fields with one field in the Murchison Falls National Park, north of River Nile, and eight in the south of the Nile. According to PAU, the average retention of contract value in Uganda through local supplier engagement during exploration, which includes supply of local goods, services, personnel, and utilising local financing, was 28 percent.
The National Local Content law outlines the scope of local content, which includes all locally produced goods, services, personnel, and financing used in any operation or activity within Uganda.
“Local content is a regulatory requirement; all the local suppliers have to do is know what to subcontract from these companies,” Mr Musherure said.
However, local suppliers continue to struggle to tap into the $2b, partly due to overpricing of their services, and lack of capacity to deliver within required timelines.
Mr Solomon Kalule, the Sinopec supply chain coordinator, thus informed local suppliers that whereas there were services that were ring-fenced, there are others, which, if they choose to participate, will have to compete with foreign companies.
“If you are a local supplier, you are better off taking advantage of that [which has been ring-fenced], but once you choose to go outside that scope, then you will have to deal with competition from foreign companies,” he said, warning local suppliers against overpricing goods and services.
Ring-fenced
In the oil and gas sector, government has ring-fenced several goods and services such as transportation, security, foods and beverages, hotel accommodation and catering, and human resource management.
Other ring-fenced goods and services include office supplies, fuel supply, land surveying, clearing and forwarding, crane hire, locally available construction materials, and civil works for local suppliers, among others.
