Francisco Laguna & Meghan Milloy
Uganda stopped issuing licenses to conduct oil activities in 2007 because the country lacked sufficient institutional and legal capacity to grant and monitor such licenses effectively. Currently, Parliament is debating the Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill 2012, a framework bill introduced by the Minister of Energy to provide basic rules governing midstream petroleum operations. Once passed, there are a minimum of six oil blocks and 10,000 square kilometers of land in the Lake Albertine Rift Basin available for licensing.
Petroleum Bill 2012 is currently stalled in Parliament over the subject of who will control oil licenses. The executive proposes that the Minister of Energy have the power to grant and revoke licenses, negotiate and endorse petroleum agreements, and approve field development plans. Parliament proposes that these powers vest in a to-be-formed Petroleum Authority of Uganda. Parliament would retain power to manage oil resources and approve members of the Petroleum Authority, once appointed by President Museveni.
Of particular concern are transparency and the inherent potential for cronyism and corruption. Many fear that giving the Minister such sweeping authority will allow him to: forego a formal bidding process; enter into “closed door” arrangements; and withhold contract terms and documents from public scrutiny. They argue that the Petroleum Authority would be better suited for operating a transparent process accountable to the public and subject parliamentary oversight in which bids and resulting contracts are available to the public.
A petroleum bill will pass: Uganda needs one to advance its oil industry; and the government and the people need oil revenues. It is still unclear, however, who will exercise power and whether the oil industry will become steeped in corruption.
Some of the legislation’s highlights are discussed below:
- Calls for the establishment of a National Oil Company and a Petroleum Authority
- Mandates that interested parties obtain licenses to conduct specific oil & gas-related activities, including: refining petroleum; converting crude oil; transporting or storing crude oil; gas processing, transmission and storage; chemical conversion, liquefaction and re-gasification; conversion of infrastructure into gasification facilities; or other gas processing and transmission processes
- Establishes (not overly onerous) penalties for violations of the law
- Creates a detailed application process in which applicants must provide the following, among other information: complete information on the applicant, including technical and financial capacity; project feasibility study, including technical and economic factors and technologies to be applied; complete environmental impact study; description of proposed facilities to be constructed; production schedule; maintenance schedule; ability to comply with all applicable Ugandan laws, including labor, health, safety and environment regulations; description of training programs for Ugandan citizens and “buy-Uganda” policies; specifications concerning; detailed specification of the crude oil to be refined, transported or stored under the license or of the gas to be processed or transmitted under the license; plan to decommission and disposed of the facility when the midstream petroleum operations cease; the manner and place in which crude oil or raw gas shall be delivered to the facility; information on facilities for the transportation and storage of petroleum; and consents and permits required under any other law
- Defines activities that do not require a license, including certain pipeline and storage facilities
- Provides for public notice of filing of applications, public review of application documents “within the limits of commercial confidentiality and public comment / opposition
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