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  • Tullow’s Shs 3 trillion farm-down to Total and CNOOC terminated over a tax dispute

    Gov’t maintains that all the assessed taxes should be paid.

    The proposed farm- down of part of the assets of Tullow Uganda Operations Pty Ltd to Total E&P Uganda and CNOOC Uganda has been terminated following the expiry and non- extension of the Sale and Purchase Agreement (SPA), Tullow Oil Plc has announced. Tullow Uganda Operations Pty Ltd is a subsidiary of Tullow Oil Plc – a British oil giant.

    In the statement, Tullow noted that the company was unable to secure the extension of the Sale and Purchase Agreement (SPA) with its Joint Venture Partners – Total E&P Uganda and CNOOC Uganda Ltd despite previous extensions having been agreed upon by all the parties. In a brief statement, Tullow said it has been informed that its farm-down to Total E&P Uganda BV and CNOOC Uganda Ltd will terminate on August 29, 2019 following the expiry of the Sale and Purchase Agreement.

    “Tullow has worked tirelessly over the last two and a half years to complete the farm-down which was structured to re-invest the proceeds in Uganda,” Paul McDade, the Chief Executive Officer (CEO) of Tullow Oil Plc said in a statement.  McDade noted that Tullow committed to reducing its operated equity stake in Uganda.

    He added, “It is disappointing to report this news at a time when we are making so much progress elsewhere towards the growth of the Group with our recent oil discovery in Guyana and first export of oil from Kenya.”

    The termination of the transaction, McDade further said is a result of being unable to agree on all aspects of the tax treatment of the transaction with the government of Uganda which was a condition for completing the Sale and Purchase Agreement.

    “While Tullow’s Capital Gains Tax [CGT] position had been agreed as per the group’s disclosure in its 2018 Full Year Results, the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of the tax relief for the consideration to be paid by Total and CNOOC as buyers,” the statement reads in part.

    ENTER THE TAX DISPUTE

    In January 2017, Tullow announced that it had agreed to farm-down 21.57% of its 33.33% interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total E&P Uganda and CNOOC Uganda Ltd for a total consideration of $900 million (Approximately Uganda Shs 3.2 trillion). The farm-down has to be approved by government upon satisfaction that the relevant taxes –  in this case, Capital Gains Tax has been paid.

    After the announcement, Uganda Revenue Authority slapped a $ 167 million (approximately Shs 617bn) tax bill on Tullow for its proposed farm-down. Tullow objected on grounds that given the costs it had incurred, $167m tax bill was not correct and that it intended to re-invest the money in the country– sparking a stalemate.

    As a result, Tullow sought for a political settlement to a tax dispute with President Museveni who in meetings with the company bosses insisted that the tax dispute should be settled with URA and not him.

    However, in the statement Tullow said the company will initiative a new sale process to reduce its 33.33 percent operated stake in the Albertine project. The termination of the transaction is likely to further delay the Final Investment Decision (FID). Joint Venture Partners had initially agreed to make a FID by the end of 2019.

    GOVERNMENT RESPONDS

    Weighing in, Robert Kasande the Permanent Secretary, Ministry of Energy and Mineral Development defended government’s position. He insisted that Tullow has to pay Capital Gains Tax from the farm down. “The government’s position is that the assessed tax should be paid in line with the laws of Uganda,” Kasande indicated in a statement.

    In another statement, Total said it was still committed to Uganda. “Despite the termination of this agreement [Sale and Purchase Agreement], Total together with its partners (CNOOC and Tullow) will continue to focus all its efforts in progressing the development of the lake Albert oil resources,” Arnaud Breuillac, Total’s President in-charge of Exploration and Production said.

    By: Edward SsekikaEdited by Muhumuza Didas

  • Parliament calls for stringent fiscal rules on the management of oil revenues

    The move is meant to curtail government’s uncontrolled withdrawals from the Petroleum Fund to finance budget deficits and/or priorities. 

    Members of Parliament on the Natural Resources Committee have called for an amendment of the Public Finance Management Act to introduce a cap on how much oil revenues can be withdrawn from the Petroleum Fund to finance budget priorities.

    The MPs proposal is contained in the report of the Parliamentary Sectoral Committee on Natural Resources on the Ministerial Policy Statements and budget estimates for 2019/2020 dated April 2019.

    The introduction of a cap, MPs argue, will curtail the uncontrolled withdrawals of revenues from the Petroleum Fund to finance budget priorities.  For instance, according to the report Shs 125 and 200 billion was withdrawn from the Petroleum Fund to finance budget priorities for the financial years 2017/2018 and 2018/2019 respectively.

    According to the Appropriation Act, 2019, government will further withdraw Shs 445.8 billion from the Petroleum Fund to finance budget priorities for this financial year (2019/2020). As at December 30, 2018, the balance in the petroleum fund stood at Shs 288.7 billion.

    “Parliament should amend sections 58, 59 (1) – (7) of the PFMA, 2015 to introduce a cap on how much oil revenues can be appropriated to the consolidated fund or the investment reserve by Parliament,” the report reads in part.

    The Public Finance Management Act (PFMA) 2015, ring fences oil revenues for only infrastructure projects and development. However, the MPs noted in the report, it was not clear whether the oil revenues so far withdrawn from the petroleum fund have been spent on infrastructure projects. The Auditor General has noted in various reports, that there are no assurances as to whether the withdrawals from the Petroleum Fund are actually financing infrastructure and development projects because the Appropriation Act often does not disclose the purpose of the withdrawals.

    “The law [Public Finance Management Act, 2015] should be amended to sufficiently provide a format for the Appropriation Act which shows, purpose, activities and amount of petroleum funds to be appropriated under the consolidated fund or transferred to the investment reserve account,” MPs further recommend in the report. This will ensure that oil revenues will be managed for the benefit of current and future generations.

    MPs also noted the lack of an investment policy and profile to guide infrastructural and developmental projects eligible for financing by petroleum revenues.

    “An investment profile of oil revenues should be developed so as to guide the balanced growth and sustainable development of Uganda. This would be essential in profiling infrastructure and development projects eligible for financing by petroleum revenues,” MPs recommended.

    Weighing in on the proposal, Didas Muhumuza, the Extractives Governance Coordinator (and Managing Editor of the Oil in Uganda magazine and website) at Action Aid International Uganda (AAIU) said a review of the law is long overdue.  “The proposal is a good mechanism that will provide the much needed checks and balances for better control of the financial in-flows and out-flows from the Petroleum Fund and ensure better management of oil revenues for the present and future generations,” Muhumuza noted. 

    However, with weak enforcement of laws plus regulations, it remains unclear whether a review of the law can curtail government’s appetite for oil revenues.

    by: Edward Ssekika,Edited by Muhumuza Didas

  • Tullow, Government in a fresh protracted fight over capital gains tax

    Tullow Uganda Operations Pty Ltd is embroiled in a fresh protracted row with government of Uganda over the payment of the Capital Gains Tax (CGT) from the farm-down of part of its   assets to Total E&P Uganda and CNOOC Uganda Ltd.  A reliable source who preferred anonymity has told Oil in Uganda that top company officials have held a series of meetings with President Yoweri Museveni and senior government officials, but no agreement has been reached.  Tullow wants to pay less tax from the farm-down on grounds that the money will be re-injected into the East African Crude Oil Export Pipeline project (EACOP). Tullow is demanding to pay the taxes in instalments, but government has rejected these proposals.

    In January 2017, Tullow Uganda announced that it had agreed to farm-down 21.57% of its 33.33% interests in Exploration Areas 1, 1A, 2 and 3A in Uganda to Total E&P Uganda and CNOOC Uganda Ltd for a total consideration of $900 million (Approximately Uganda Shs 3.2 trillion). Completion of the farm-down is subject to certain conditions, including the approval of the government of Uganda. In its December 2017 report, Tullow had expected to complete the farm-down by June 2018. However, protracted negotiations over capital gains tax has delayed the completion of the farm-down to date.  It is not clear when the company will reach a deal with government and proceed with the sale.

    Tullow hinted on its frustration with Ugandan government over the issue in the company’s 2019 half year results report released on July 24th 2019. “In Uganda, following meetings in January 2019 between the CEOs of Tullow and Total, and President Yoweri Museveni of Uganda, where principles for the tax treatment of the farm-down to CNOOC and Total were agreed, the Joint Venture Partners have worked to finalise an agreement based on these principles,” the report reads in part. However, the report blames government on going against what had already been agreed upon.

    “Tullow and its joint venture partners, have, so far, been unable to finalise this agreement with the government of Uganda. We continue to work constructively with our joint venture partners and the government of Uganda to agree a way forward to complete the farm-down and determine the subsequent timing of Final Investment Decision (FID),” the report notes.

    “Nevertheless, although negotiations continue, Tullow is now also considering all options in pursuing the sale of its interests in Uganda,” Paul McDade, the Chief Executive Officer Tullow Oil Plc noted in the report. 

    According to the report the joint venture partners continue to work towards reaching the Final Investment Decision (FID) for the development project in the second half of 2019 with the project’s technical aspects now completed,” the report reads in part.  However, it remains unlikely that the joint venture partners will make a FID this year – it could be further delayed to 2020.

    Once the farm-down is completed, Tullow will cease to be an operator in Uganda. The company will only retain a presence in-country to manage its non-operated position. However, overall the company performed well in half year results.

    The company is upbeat by the approval of Tilenga project Environmental and Social Impact Assessment (ESIA) and the Kingfisher ESIA public hearings which were successfully concluded.

    by: Edward Ssekika,Edited by Muhumuza Didas

  • EACOP affected districts want more jobs for local people

    Local people from districts that will be traversed by the East African Crude Oil Export Pipeline (EACOP) project want government and oil companies to grant special treatment in the oil pipeline related jobs. Government and joint venture partners – Total E&P Uganda, CNOOC Uganda Ltd and Tullow Oil Uganda are currently engaged in land acquisition processes for the pipeline.

    “At the beginning of the project, we were told that our local people with the requisite qualifications, would be given jobs. But now, even Community Liaison Officers (CLOs) and even drivers are from other districts,” George William Katokoozi, the Chairman, Sembabule District Land Board (DLB) recently told Oil in Uganda. He explained that excluding pipeline host communities from oil jobs is setting a bad precedent and could be the beginning of the “oil curse”. “We have some of our sons and daughters who are qualified. We have drivers from Sembabule, why can they not be given jobs in New Plan, ICS and other companies working on the EACOP. Why are our local people being discriminated against?” Katokoozi angrily wondered.

    The 1,445 kilometre heated pipeline will traverse the districts of Hoima, Kikuube, Kakumiro, Gomba, Sembabule, Lwengo, Kyotera & Rakai on the Ugandan side. These districts will host a series of infrastructure projects such as construction camps, pump and heating stations among others. Speaking at Mbirizi Catholic Social Centre in Lwengo district, Ssensalire Christopher, Lwengo district Vice Chairman concurred with Katokoozi. Ssensalire wants EACOP related companies to put a certain percentage of qualified local persons they should employ from EACOP affected districts. “One of the ways through which our local people can benefit from the oil and gas sector is local employment. So, our people are side-lined, as leaders we get concerned,” Ssensalire said.

    FEARS

    Local leaders also expressed fears that some of the irregularities experienced in land acquisition for the proposed oil refinery could be repeated in land acquisition for the pipeline. “We have heard complaints of delays in compensation from people in Hoima [people affected by the oil refinery]. We need an assurance that such delays will not be repeated in the EACOP affected districts. It is a fear calling for serious action and is expressed by the project affected persons,” Ssensalire said.  He asked government to consider training project affected persons (PAPs) on financial literacy before compensation to ensure that PAPs do not put compensation money to waste.

    “There are some things they may not do to save, so leaders should be vigilant.  He challenged leaders in Rakai and Kyotera to understand the value of compensation rates and fight to get fair rates. They should mind about their people. Leaders should work for the interest of their people,” he explained.

    Ssenyonjo Stephen, Chairperson Local Council III of Lwebitakuli Sub-county, Sembabule district asked district leaders where the oil pipeline passes to press government to have meaningful Corporate Social Responsibility (CSR) for better delivery of benefits to the local populations.

    By: Edward Ssekika,Edited by Muhumuza Didas

  • Youth cautioned to dispel oil politics, focus on tapping opportunities

    Participants at a youth entrepreneurial and innovations “clinic” in Gulu organized by ActionAid Uganda and partners have been urged to look beyond the petty politics being peddled about the oil and gas sector and instead channel their energies on positioning themselves to benefit from it.

    The call was made following emotional outbursts by some participants who raised concerns about the perceived discrimination against the region by locating crucial oil infrastructure outside their region. They also argued that youth from the region were not benefiting from skilling and training opportunities being offered by oil companies (and the government).

    “If you are to benefit from this sector you must think about yourself and how you are going to gain out of it. The oil sector is global and the politics will always be there. What will you do about it? We are not the first to have oil and will not be the last. Are you going to move the airport from Kabaale (in Hoima) to Nwoya?” Paul Twebaze stung the participants.

    He added: “These decisions are informed by detailed studies on cost-benefit and economic analyses. Investors do thorough feasibility studies that cost a lot of money before committing their money.”

    Information gaps

    During a courtesy visit to the Albertine region in 2017, local leaders at Got Apwoyo sub-county headquarters voiced similar sentiments. A riled L.C 3 Chairperson particularly wondered why crude oil would be transported to the central processing facility (CPF) in Buliisa district via a network of pipelines yet it would be extracted from Murchison Falls National Park which is in Nwoya district.

    Didas Muhumuza, Extractives Governance Coordinator at AAIU, narrated how during his time at Tullow Oil as a community liaison officer, got wind of information that young people in Hoima were planning to beat him up because they contended that oil companies were discriminating against them and that he was their agent in doing so.

    “I communicated to the management teams in Uganda and the UK about the situation but also advised that the problem was due to lack of information among the population. We thus devised a strategy to start regular sensitization of all stakeholders through radio and workshops. Some introductory training(s) to oil and gas aspects were also undertaken,” he said. This was very helpful in ameliorating the situation overall.

    Twebaze Paul, a civil society stakeholder in the sector, once shared a story of how he and a team of colleagues were given an ultimatum of an hour to exit Amuru district by security people after their meeting to brief the community about the sector was stopped.

    “Talking about oil then was risky. In 2012 we went to Amuru to talk to the community about oil and how the resource can benefit everyone and not become a curse. Security people arrested us and tasked us to explain who had given us authority to talk about oil,” he narrated.

    Muhumuza noted that lack of information among the general public remains a challenge. However Ronald Kaija, Senior Community Relations Officer at CNOOC Uganda, the developer of the Kingfisher oil fields, says information is now more readily available across many public domains but it is upon the young people to seek it out.

    “Recently we have held public hearings on the ESIA report for the Kingfisher Development Area (KFDA). How many have accessed or tried to read this technical extract explaining what we are going to do?,” Kaija asked participants while showing the copy that was freely distributed at the hearings.

    Notably the public hearings were commended by civil society actors as a step in the right direction in as far as access to information is concerned. James Muhindo, the Coordinator of the Civil Society Coalition on Oil and Gas, noted that the hearings were unprecedented and presented an opportunity for the people to get involved in the sector by being heard and appraised on its developments.

    The entrepreneurship development workshop(s) presented a unique opportunity for participants to appreciate the challenges of operating a business in a very intricate oil and gas sector with very high competitiveness. Participants, mostly drawn from the districts of Hoima, Kikuube, Buliisa, Masindi, Nwoya, Amuru and Gulu districts also shared their experiences of exploiting business opportunities in the Albertine region amidst the oil developments that have thus far taken place. They have been provided with vital insights on what opportunities the development (and production) phases will provide.

    Participants were also tipped on skills and knowledge on how to go about doing business in the oil industry by appreciating the standards that have been set by government (and oil companies) for those willing to conduct business in the sub-sector as it gears for transition into the development and production phase(s).

    Jackson Etwop, a social movement’s facilitator and motivational speaker, spoke to participants in Acholi to drive home the message of mindset change and hope. “We are our own obstacle to changing our situation. Opportunities are there and amongst us are fellow youth that have made it and can inspire us. Unless we change the mindset we will not change our situation”. Jackson emphasized. The clinics shall be concluded in Pakwach district but the participants shall be followed up to ensure appropriate measurement of impact of the trainings undertaken.

    By Robert Ben Mwesigye Edited by Muhumuza Didas

  • Uganda’s journey to EITI

    The Oil-rich Uganda is set to join the Extractive Industries Transparency Initiative (EITI), an independent, internationally agreed upon, voluntary standard for creating transparency within the extractives sector. Ever since Ugandan discovered commercially oil reserves in 2006, civil society actors started a campaign to convince the Ugandan government to join EITI.

    The campaign registered headway when Parliament in 2008 passed the National oil and gas policy that among others asked Government to join EITI. The policy states that joining EITI would help “ensure collection of the right revenues and use them to create lasting value for the entire nation,”

    As Uganda made little progress in joining EITI, the Western Uganda Youth MP Gerald Karuhanga who is presently the Ntungamo Municipality lawmaker presented to parliament documents which he alleged implicated Uganda’s foreign affairs Minister Mr Sam Kutesa, internal affairs minister Hilary Onek, and Mr Amama Mbabazi, the then Uganda’s prime minister in receiving millions of dollars from Tullow Oil.

    He alleged that between June 1st and July 16th, 2010, Tullow paid up to $100 million to “expert” bureaucrats, among them the three ministers. Tullow Oil denied the allegations. Parliament instituted an adhoc committee to investigate the matter and after two years of investigation, the committee did not find any evidence to confirm any wrongdoing by Tullow Oil and the Ministers.

    In a stormy parliament session when the oil bribery allegations were discussed in parliament in October of 2011, Parliament passed a resolution re-affirming Uganda’s need to join EITI.

    The European Union delegation to Uganda has been urging Uganda to join EITI, a source at the EU told oil in Uganda.

    “We have been having discussions with the Ugandan government to embrace EITI. We are pleased that Uganda has embraced the initiative. We wait to see how it will be implemented” a diplomatic source said before referring this author to the EU website that has a short statement about EU’s stand on EITI.

    The decision taken by Uganda’s Cabinet on January 28 and publicly announced by the Government of Uganda on January 29, is a very positive step towards improved public financial management and accountability of natural resources, said the EU statement dated January 30, 2019.

    “The EITI is the global standard to promote the open and accountable management of oil, gas and mineral resources, and Uganda’s decision to become a fully-fledged member state is an important step for improved accountability particularly as the country continues to prepare for oil production,” said EU Ambassador Attilio Pacifici.

    Through persistent policy dialogue, the European Union and its Members States, as well as other leading development partners, have encouraged Uganda’s formal accession to the EITI to address key governance issues of the oil, gas and mining sectors, including transparency and accountability.

    “This is a very positive step towards improved financial management and accountability of natural resources,” Attilio added.

    EITI was launched in June of 2003 as a way to tackle corruption within those industries that engage in the commercial development of oil, natural gas, and minerals.

    When a country joins EITI, it agrees to publicly disclose the money and other benefits it receives from the extractive companies that operate within its borders. EITI does this by having independent auditors publicly reconcile company payments with government receipts.

    “Ideally, such transparency helps empower all major stakeholders, including civil society, to hold governments and oil companies accountable for the management of those resources” says a report that was released by the Advocates coalition for Development an Environment (ACODE), a Ugandan Think Tank.

    The report titled, Extractive Industries Transparency Initiative (EITI), a necessity for Uganda was authored by Ms Winfred Ngabiirwe, the Executive Director, Global Rights Alert (GRA), Executive Director and Publish What You Pay Uganda Chapter and Ms Elizabeth P. Allen, who was a research Associate at ACODE.

    The research stated that EITI can help reduce secrecy and mistrust between governments, citizens, and oil companies.

    “In many oil-producing countries, secrecy in the extractive sector has heightened suspicion among citizens who assume that such secrecy exists to hide corruption on the part of government officials and/or oil companies. EITI can help create forums for dialogue, understanding, and resolution that illuminate the sector for all players involved” the study said.

    EITI can also help create an improved investment climate for those countries that participate. Credible investors and international financial institutions find it pleasing to invest in governments that have embraced EITI since they are assured of transparency.

    EITI helps the public in understanding how much their country receives from extractive industries and the contribution of minerals in the economic welfare of the citzens.

    In a country where corruption is rampant, says Mr Biira Nasser Kiwanuka, the Executive Director of the Mid-Western Regional Anti -Corruption a Coalition (MIRAC), EITI acts as a watch dog for the public to expose incomes, expenditures and leakages of revenues from oil and other minerals.

    Edward Ssekika & Francis Mugerwa

  • Ministry, ActionAid to launch project to register ASMs

    Artisan Miners evicted and displaced by Uganda Millitary.

    As plans to properly harness the mineral resource potential by government takes shape, the Ministry of Energy and Mineral Development will launch the Biometric Registration and Management of the ASM segment in Uganda Project (BRASM), on Friday 29th March 2019, in Kampala. The move is the commencement of an arduous process by government efforts to formalize the artisanal and small scale mining (ASM) sub-sector, which constitutes 90% of the mining activity in Uganda and is a source of livelihood for many people. Formalization and regulation of the ASM sub-sector is part of Government’s broader strategy of ensuring that mining as a whole becomes one of the key economic drivers of the Ugandan economy as envisaged by the country’s Vision 2040 and National Development Plan II (2015/16 – 2020/21). Much as the development is part of Uganda’s commitment and recognition of international and regional initiatives such as Africa Mining Vision (2009), the International Conference on the Great Lakes Region (ICGLR) 1, ASM Formalization Guide in the Great Lakes Region and the IGF Guidance for Governments on managing the ASM sub-sector, it comes as a huge boost for the local miners who remain uncertain about their plight in the ever metamorphosing mining sector and mineral development overall. ASM activities had for long been regarded illegal in Uganda though the sub-sector continued to attract many people in pursuit of survival, an aspect that has drawn attention owing to its social inclusivity and potential to improve the livelihoods of many people in impoverished nations. This is evidenced in a policy brief by Africa Centre for Energy and Mineral Policy that will undertake the BRASM project (on behalf of the Directorate of Geological Surveys and Mines), which linked ASM to the Sustainable Development Goals which form part of Uganda’s development agenda. “On a global level, Uganda embraced the 2030 Agenda for Sustainable Development to foster social inclusion, environmental sustainability and economic development through the Sustainable Development Goals (SDGs) and has made strong efforts to domesticate the SDGs to achieve its targeted development outcomes. Mining is one of those sectors that can contribute to Uganda’s development targets given that ASM directly relates to many of the SDGs,” the brief states. Whatever promise the ASM sub-sector held for transforming people’s lives however was thrown to the wind (especially in Mubende now Kassanda district), when artisanal and small scale gold miners were ruthlessly evicted from the mines in August 2017, where over 60,000 people etched a living. The shocking development was widely condemned by Civil Society among other stakeholders. The President of Uganda however argued that unlike other gold mining areas such as the eastern district of Busia which he cited, the Mubende mines posed a security threat as the people working there were not known thus being foreigners. He said the move was necessary to organize them first and know who they are and duly register them. Organising the sub-sector henceforth became a priority of the MEMD as government was urged to fast track the process of amending the mining laws in search of a solution for the miners and avoid such drastic measures like evictions in future. Consequently the process of registration is a precursor to the integration of ASM activities and operations into the broader mining legal and regulatory framework as well as integration of informal ASM activities into the formal fiscal and economic system. This is envisaged to reduce or eliminate the social and environmental negative impacts and externalities of ASM operations, streamline ASM operations alongside medium to large scale mining operations and concessions and capture lost economic value of the sector for the sustainable development of the Ugandan economy. The MEMD therefore is partnering with ActionAid International Uganda to officially launch (as shared above) the biometric registration initiative to enable stakeholders appreciate and how it works and the value it will create to especially ASMs going forward. By Robert Mwesigye Edited by Flavia Nalubega Edited by Didas Muhumuza Oil.Uganda@actionaid.org

  • Hoima residents demand for ‘oil jobs’

    Residents of Buseruka sub county, accuse SBC – a company that is constructing Hoima International Airport of coming with their workers from Kayunga to the detriment of the locals “Early this year, When SBC Uganda Limited [A company constructing Hoima International Airport] started construction of the airport early this year, we [local people] were promised jobs. However, we only see buses ferrying workers from Hoima to here, where are the jobs they promised us,” Julius Muhumuza asks angrily. Muhumuza said that he got recommendations from local leaders to get a job as a casual laborer. However, he was never given the job. Just like Muhumuza, Bosco Twaha another resident of Nyamasoga village, Buseruka sub-county, Hoima district complains, “I have a class A driving permit [a driving class for truck drivers]. I applied for a job as a driver but my application was turned down”. Nyamasoga village is just adjacent to Hoima International Airport that is under construction. The airport is one of the oil-related infrastructure projects required before the country can start oil production. However, local people in Hoima have expressed their dissatisfaction with SBC Uganda Ltd – a company that was granted a contract to construct the Hoima International Airport over the failure to employ them. The locals accuse the company of deliberately locking them out of oil related jobs. They are accusing SBC-Uganda Limited of not implementing local content policy requirements to enable locals benefit from the project. They claim that the company has considered other young people from other places of the country and that few are from within. However, the company officials say locals have been given jobs. Currently, SBC Uganda Ltd employs a total of 664 people at the airport construction site. Out of these, the company explains that 147 people hail from Hoima district alone. Currently, most of the work at airport construction site includes clearing the bushes for the runways, operating construction machines such as excavators, drivers and other casual jobs among others. He says the company is committed to ensure that at least 30 percent of its work force are local people. Stanislaus Birungi, the Human Resource Manager, SBC-Uganda Limited explains that they are currently on earth works whereby the jobs are fixed, adding that most of those who come seeking for jobs do not qualify. He denies claims that the local people have been locked out of jobs. “How many wheel loader operators do we have? How many people have heavy trucks driving permits?. Most people do not have required skills and experience. We need few mechanics and builders at the moment,” he added. Mr. Ali Tinkamanyire, the sub-county Chairman of Buseruka attributes the local anguish to high expectations people have in the oil and gas sector. “Not everyone will be employed in the oil and gas sector,” he said. He appealed to central government to ensure that local people are trained and skilled to be able to participate in the sector. Recently, in a new twist and out of anger, the local people ambushed the company vans transporting SBC workers and pelted them with stones.Allan Julius Hakiza, police spokesperson for oil rich Albertine region says police intervened and started escorting the vans to the construction site. “We realized that escorting the vans was not a sustainable option, we conducted community policing meetings in those villages, where we explained to the local people to be patient or look for other options of benefiting from the sector. Not everybody is going to be employed in the oil and gas sector,” Hakiza said. The locals say, most of the workers at the airport construction site hail from Kayunga district where SBC Uganda has been constructing a road. “SBC has come with their people from Kayunga. This is unacceptable,” Muhumuza says angrily. Edward Ssekika Oil.Uganda@actionaid.org

  • Uganda works to phase out mercury usage

    The maiden Conference of Parties to the Minamata Convention on Mercury took place in Geneva on September 24-29. The Convention is an international legal instrument or Treaty designed to protect human health and the environment from anthropogenic emissions and releases of mercury and mercury compounds. The Convention currently has been signed by 128 countries and ratified by 83 so far.

    The Minamata Convention requires the phase out of many products containing mercury, implements restrictions on trade and supply of mercury and establishes a framework to reduce or eliminate emissions and releases of mercury from industrial processes and mining.

    Mercury is widely used by artisanal and small scale gold miners, Uganda inclusive. According to the UN, the practice of mercury amalgamation in Artisanal and Small Scale Gold Mining (ASGM) is of particular concern due to the “decentralised distribution of elemental mercury utilized and its widespread handling, thermal conversion and disposal within social settings such as shops, villages, and food production areas.”

    The sad bit in Uganda is that because of the state of ASGM, unregulated and illegal, miners have no idea of the dangers of mercury. At high levels, mercury can harm the brain, heart, kidneys, lungs, and immune system of people of all ages. According to studies, high levels of methyl mercury in the bloodstream of unborn babies and young children may harm the developing nervous system, making the child less able to think and learn and potentially reducing their IQ.

    During a working visit in Namayingo a miner brazenly said he had handled mercury for over ten years but “nothing was wrong with him and he had never developed any problems.”

    Asked how they accessed mercury, a miner in Nsango B village, Budde Sub County in Bugiri district once told a team from Oil in Uganda that they ‘had suppliers’ but was not willing to elucidate. Mercury however is largely smuggled from Tanzania and easily accessible by the miners at just between Sh800 and Sh1000 a gram meaning it is easily accessible.

    Government intervention

    Mr Erienyu Johnson, the Busia District natural resources officer, displaying a bottle of dirty brown-coloured water, noted how he had fetched a sample from R. Okame in Busitema where miners used mercy nearby. He said locals had complained that the water had been contaminated by the miners.

    He said a nongovernmental organisation, Environmental Women in Action for Development (EWAD), ventured into the district to ‘build artisanal miners’ capacity and promote safe mining without using mercury..

    Mr Erienyu said though the district leadership is in the process of working out something to manage the use of mercury by artisanal gold miners there are currently no measures in place.

    “We currently have a draft ordinance that is to be presented at the next council seating,” he told Oil in Uganda.

    National Task Force

    At the national level, Uganda, through National Environmental Management Authority, has a task force – Strategic Approach to International Chemicals Management (SAICHEM) – which is the national focal point for the management of use of mercury.

    Mr Paul Twebaze, an environmentalist working with Pro-Biodiversity Conservation Uganda (PROBICOU), says the civil society organisation is the national focal point NGO for SAICHEM in Uganda.

    Twebaze says PROBICOU is also a member of the National Steering Committee of the Stockholm Convention against Persistent Organic Pollutants (global treaty ratified by the international community lead by UNEP – calls for the elimination and/or phasing out of 12 POPs) in Uganda, activities all coordinated by NEMA.

    “We have been a lead NGO doing work on mercury and of course working towards ratification of the Minamata Convention working with the Government of Uganda to speed up the processes of the ratification of the Minamata Convention.

    “We got involved in the negotiation processes and are currently working with government on enabling activities,” Twebaze says.

    “We are working with the health sector to discourage the use of dental amalgam which contains mercury. Additionally we are also trying to promote the use of mercury-free electronic appliances,” Twebaze says of their manadate.

    He says they are also working with all stakeholders in the mining industry to minimize and eventually phase out the use of mercury especially by the artisanal and small scale miners.

    Paul says Uganda is being supported by the Secretariat of the Minamata Convention to speed up the process of ratification.

    “After Uganda has fully understood and appreciated the situation I am confident it will ratify the Convention,” he says.

  • East African Crude Oil Pipeline: The Inside Story

    East African Crude Oil Pipeline: The Inside Story Details emerge of how the crude oil pipeline will be financed, managed

     New details have emerged in the East African Crude Oil Pipeline (EACOP) regarding how it will be financed, run and managed. For starters, Uganda plans to construct a pipeline that will transport its crude oil to the international market through the Tanzanian coastal port of Tanga.

    The pipeline, is expected to be completed by the year 2020, when the country is scheduled to start oil production. In fact, Uganda’s President, Yoweri Museveni and his Tanzanian counterpart recently commissioned the construction of the East African Crude Oil Pipeline. The two leaders laid mark stones for the crude oil pipeline in Mutukula, Kyotera district and Kabaale in Hoima district. Total E&P Uganda, a subsidiary of French oil giant, Total S.A, is spearheading the construction of the crude oil pipeline on behalf of the joint venture partners. Adewale Fayemi, the general manager, Total E&P Uganda says discussions are ongoing to discuss on the formalities of how the pipeline will be run.  Already, an agreement has been reached that the East African Crude Oil Pipeline (EACOP) will be run and managed by a Special Purpose Vehicle (SPV) – private pipeline company. This means that a private company will be incorporated with joint venture partners – Tullow Uganda, Cnooc Uganda Ltd and Total E&P Uganda, and the governments of Uganda and Tanzania as shareholders in the company.

    Uganda’s minister of Energy and Mineral Development, Irene Muloni, says that the National Pipeline Company (U) Ltd – a subsidiary of the Uganda National Oil Company (UNOC) will own shares in the pipeline company (Special Purpose Vehicle), on behalf of the government of Uganda. As of now, the pipeline company (Special Purpose Vehicle) is yet to be incorporated.

    “Negotiations are underway for the setup and corporate structure of the proposed company,  that will run EACOP”, Samantha Muhwezi, the Legal Advisor EACOP at Total E&P Uganda explains. The pipeline company, will build, own and operate the crude oil pipeline project.

    Eng. Muloni said that there is a possibility of bringing on board investors into EACOP in addition to the governments of Uganda, Tanzania and the Joint Venture partners. Once the pipeline company is incorporated, another sticky issue that will have to be ironed out is how the company will meet its tax obligations both in Uganda and Tanzania.  However, at the moment there is already commitment to exempt it from tax.

    “There will be no pay transit tax, no Value Added Tax, no corporate income tax. The government of Tanzania gave us 20 years depreciation tax holiday, granted us a free corridor where the pipe line passes and promised to buy shares in the pipe line,” President Museveni said, while laying a mark stone for EACOP at Mutukula, Kyotera district.

    Financing

    Another issue under consideration is the financing of the pipeline project. At least $ 3.5 billion dollars is needed to finance EACOP. Accordingly, to preliminary information, the funds will be raised through debt and equity from joint venture partners and national oil companies of Uganda and Tanzania. Already, Total E&P Uganda, Tanzania and Uganda have appointed three companies as financial advisors for the pipeline. A consortium of South African based Standard Bank, Imperial Bank of China (IBC) and Sumitomo Mitsui Banking Corporation Europe Ltd, were recently appointed as the financial transactional advisors for EACOP.

    “They are advising us on how to structure the project to enable lenders to be able to finance the project,” Muhwezi said. Sources indicate that IBC is expected to advise CNOOC Uganda Ltd while SMBC will work with Total E&P Uganda, the lead joint venture partner on the crude oil export pipeline. The special purpose vehicle will also charge $12.2 dollars for every barrel of oil that will be transported in the pipeline, making Uganda’s crude oil profitable even at today’s rate of $50 per barrel.

    Technical Specifications

    Uganda’ crude oil has low Sulphur content and therefore, waxy and solidifies at room temperature. This requires heating of the pipeline to at least 50 degrees Celsius to make the crude flow. This means it will require a lot of electricity to heat the pipeline. It will have eight main pumping stations and five heating stations.

    “We might use solar energy to reduce on the power to heat the pipeline,”. Muhwezi said. Once completed, at 1,445 kilometers, the East African Crude Oil Pipeline, will be the longest electrically – heated pipeline in the world.  Uganda will host 296kms of the pipeline, while the remaining 1,149kms will be in Tanzania. In Uganda, the 24-inch diameter, heated pipeline, will go through the districts of Hoima, Kakumiro, Kyankwanzi, Mubende, Gomba, Ssembabule, Lwengo, Rakai. In Tanzania, it will go through eight regions and 24 districts. It will be a buried pipeline, with an estimated 1-2 meters buried underground and planned to have a daily flow rate of 216,000 barrels per day. It will be designed to add volumes of crude from other countries like Tanzania, South Sudan or Democratic Republic of Congo, incase, they want to use it. During construction, EACOP is expected to generate between 10,000 to 15,000 direct jobs and 30,000 temporary jobs at peak.

    Tanzania’s President, John Pombe Magufuli recently pledged Tanzania would now buy crude oil from Uganda instead of incurring high expenses of importing from the Arab world. The Hoima-Tanga route was selected because it offered the least cost route for the transportation of crude oil from Uganda to the East African Coast. Muloni says the Front End Engineering Design report for EACOP and environmental social impact assessment (ESIA) studies, expected to be completed next February, will lead to FID in the first quarter of 2018.

    Edward Ssekika

    Oil.Uganda@actionaid.org