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Unlocking opportunities post FID

Ugandans train in welding. There are huge opportunities for every Ugandan business in the oil ang gas industry following the Final Investment Decision. 
PHOTO/file

What you need to know:

One of the ways that Ugandan business/individuals can maximise participation in the sector is to identify partners to jointly work with in order to have a competitive advantage in the industry and meet the required standards, Veronica Yvonne Magembe writes.

The announcement of the Final Investment Decision (FID) on 1 February 2022 was a historical day for Ugandans and the oil and gas industry.

FID represented the point where key decision makers in government and international oil companies made the final decision to proceed with execution and development of the oil and gas projects (including the upstream development and the pipeline) in Uganda. This means that government and international oil companies will now significantly spend money on these projects.

What next after FID?

The post FID stage of the project involves development (that is engineering, procurement and construction) of the upstream and midstream projects. There is going to be a massive boost in the economy and huge capital injection in the projects.

With the extensive capital injection required of about $15b over the next three to five years, there are huge opportunities for each and every Ugandan business whether directly (such as construction, camp management and drilling) or indirectly (such as cleaning & catering services and agricultural products, medical and health services, education services, waste management, health and safety, transport and logistics services) involved in the oil operations, as long as your business meets the required standards and quality required in the industry.

Given the high standards and quality requirements in the industry, one of the ways to enhance participation by Ugandans in the sector, is to form Joint Venture (JV) partnerships (where by two or more business/individuals come together) to execute an oil and gas contract/transaction. The partnership may involve two or more companies/individuals with different areas of expertise working together to provide goods and services to the oil and gas industry.

In selecting a JV partner, you can consider the skills and resources required and the commitment of the partners to working together to achieve the common objective of providing goods and services in the industry.

The partners are sourced by identifying business or individuals that have specific skills. Alternatively, you can check on the National Supplier Database that has registered business interested in supplying goods and services in the industry or National Oil and Gas Talent register for individuals with specific skills. The partnerships will lead to expansion of your business and the partners will share the income, expenses, risks and rewards involved in the industry. There are immense benefits for Ugandan companies and individuals to jointly work together.

Access to resources and skills

The JV partnerships will enable your business to bring together resources and scale up on the possible limited capacity. This gives competitive advantage to both parties to generate economies of scale. For goods, a business that sells packed/processed meat or chicken can seek partners that hatch and grow chicken to increase production and economies of scale. For services providers, you can obtain a partner with different skills to demonstrate the breadth of experience in that service specified in tenders.

Easy access to finance

The parties will have easy access to financing from the financial institutions as the business can easily mobilise and have in place the requirements prior to accessing the funds.

Access to market, technology and reduction in costs and price

Thirdly, working jointly together will open up market for your business to grow and develop, improve services and technology advancement, reduce cost of production and improve pricing of your products on the market.

In conclusion, one of the ways that Ugandan business/individuals can maximise participation in the sector is to identify partners to jointly work with in order to have a competitive advantage in the industry and meet the required standards and quality to deliver goods designated for Ugandan business. The partnerships will also make it easier to match the technical and financial capabilities of competing foreign companies.

The author is the tax manager, oil and gas at PwC Uganda.

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