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Oil and gas laws give leverage to foreigners, lawyers say
President Museveni commissions the Legacy Publication on Uganda’s journey to first oil to commemorate the announcement of Final Investment Decision at Kololo Independence Grounds in Kampala on February 2. Front row, left, is Tanzania Vice President Philip Mpango, Minister of Energy Ruth Nankabirwa (2nd right), and TotalEnergies SE chairman and chief executive officer Patrick Pouyanne (right). Back row, left to right, is UNOC CEO Proscovia Nabbanja, president of CNOOC Uganda Ltd Chen Zhiobiao, Tanzania minister of Energy January Makamba, and TotalEnergies EP General Manager Philipe Grouex. PHOTO / ABUBAKER LUBOWA
What you need to know:
- The law hoodwinks Ugandan investors because of the existing loopholes.
With Uganda expecting its first oil drops by 2025, lawyers have cited a number of loopholes in the laws governing the industry.
The loopholes mainly rotate around ring-fencing services in oil and gas sector for Ugandans.
Some of the legislation includes the Petroleum (Exploitation, Development and Production) (National Content) Regulations, SI No. 44/2016 and the Petroleum (Exploitation, Development and Production) Act.
Mr Didan Barisigara, an energy oil and gas lawyer from A.L Advocates, said the current laws give leeway for foreigners to access those ring-fenced oil services for Ugandans, which is unfair.
“Local content regulations more so regarding the ring-fenced services in the oil and gas sector, are lacking because we found that a foreigner can incorporate as a Ugandan company and participate in providing those ring-fenced services,” Mr Barisigara said yesterday during a discussion on the oil and gas sector in Kampala.
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He added: “Initially, they (oil services) were meant or put aside specifically for Ugandans, Ugandan companies and entities but foreigners can manipulate this loophole in this law which doesn’t protect a Ugandan . This deprives Ugandans of the ability to participate in these ring-fenced companies and taking over jobs meant for Ugandans as intended by the framers of the law.”
Another lawyer, Mr Francis Karoro, expressed similar reservations, saying the laws are not serving the purpose for which they were enacted.
“You have to look at what the purpose of this law was; why these services were ring-fenced and the reason to promote the Ugandan investor, but if you look at the ultimate beneficiaries in most companies are shareholders who are not Ugandans. Employees just wait for salary at the end of the month,” Mr Karoro said.
He added that the law hoodwinks Ugandan investors because of the existing loopholes, which he said should be re-examined. Mr Jonathan Wandera, the managing partner of A.L advocates, cited another legal loophole being around joint ventures.
“The law also provides for joint ventures where Ugandans can partner with foreign companies but the Ugandan company should have a minimum of 48 percent shares and this renders the joint venture law useless,” Mr Wandera said.
“If I am a foreign investor, I don’t have to partner with Ugandan companies to operate, all I have to do is incorporate as a Ugandan company and bypass the joint venture requirement,” he added.
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Mr Klaus Mukumbi J, a tax and litigation expert, said the existing oil laws are a “smokescreen” to show that Ugandan investors are being catered for but in reality, they aren’t.
