UIA wants review of oil clauses on local content

An oil exploration camp in Nebbi District. The oil and gas business is very capital intensive, requiring companies that have a strong capital base. Photo by Felix Warom Okello.

What you need to know:

Experts say the law needs clarity concerning the 48 per cent provided for local players in joint ventures.

The Uganda Investment Authority (UIA) has called for amendments to the local content clauses within the oil sector, which it says do not guarantee local participation.

Speaking recently at a conference on oil governance in Uganda and the Great Lakes region, Mr Albert Ouma, the UIA director of small and medium enterprise division, disclosed that foreign companies will continue dominating service provision because local players are not empowered enough, even by the laws in place.

“Service provision in this sector requires huge start-up capital and yet government has not come out to help the willing players with average capacity,” Mr Ouma noted, “The law itself needs clarity on the 48 per cent provided for local players in joint ventures because in most cases, local players cannot raise their share capital.”

The law
The 2013 Petroleum Exploration (Development & Production) Act gives legal support to local players to profit from auxiliary oil businesses, but experts noted that, “it is not elaborate on local content.”

Article 125 notes: “Where the goods and services required by the contractor or licencee are not available in Uganda, they shall be provided by a company which has entered into a joint venture with a Ugandan company provided that the Ugandan company has a share capital of at least 48 per cent in the joint venture.”

“Assuming the local player in the joint venture cannot raise the necessary capital or provide the goods and services because in most cases they don’t have the capacity to do so,” Mr Ouma argued, “How does the law or any relevant authority measure this domestic content ownership or even value chain?”

The law, further, stipulates that within 60 days after the end of each calendar year, the licensee shall provide government through a Petroleum Authority of Uganda with a report of its achievements of the contractors and sub-contractors’ in utilising Uganda’s goods and services during that calendar year.

Mr Peter Lokeris, the Energy junior minister, however, responded saying government was cognisant of the huge start-up capital required in the sector, and was doing its best to aid the local players.

Experts further urged government to undo such barriers to allow the growth of local content, and called for the adoption of a Ghanaian-like policy on local content which calls for, “priority being given to local players regardless of the capital required.”