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
Finance Minister Matia Kasaija
Latest reports on the inflows, outflows and assets of the Fund reveal a patterns of irregular withdrawals of monies to the consolidated fund to finance budget deficits.
A new report from the Ministry of Finance, Planning and Economic Development reveal that has withdrawn Shs 200bn from the Petroleum Fund to finance budget deficits. A semi-annual report to Parliament on the inflows, outflows and assets of the petroleum fund for the period ended 31st December, 2018 indicate the money was withdrawn to finance the 2018/2019 budget priorities. The report is authored by Matia Kasaija, the Minister of Finance, Planning and Economic Development.
According to the report, by June 2018, the Fund had Shs 507 billion mainly from Capital Gains Tax, surface rentals, technology and training fees from oil companies as well as signature bonuses from the signing of Production Sharing Agreements with Nigeria’s Oranto Petroleum Limited and Australia’s Armour Energy Ltd.
According to the report, the Fund stands at Shs 288.7bn as at December, 2018. “This is a reduction in the Fund value reported as in June 2018 report, which stood at Shs 507 billion,” the report notes. “The report details the status of the Fund for six months ending 31st, December, 2018.
“In accordance with section 61(1) of the Public Finance Management Act, 2015 as amended, this is to lay on table the semi-annual report of the Petroleum Fund for the financial year 2018/2019,” Kasaija’s wrote in a letter forwarding the report to the Speaker of Parliament. Kasaija’s letter is dated March, 28th, 2019. The Public Finance and Accountability Act, 2015, mandates the Minister of Finance to report to parliament on the status of the Fund in terms of inflows, outflows and assets every after six months.
Justifying the withdrawals, Lawrence Semakula, the Accountant General recently said, “We have all these priorities such as financing infrastructure, so what do we do when we have a deficit. Rather than go out and borrow, we would rather use the money from the Fund,” he told Members Parliament.
The report notes that since production has not yet started, nil volumes and values of petroleum production have been reported.
“The further notes that during the reporting period, URA collected petroleum related taxes worth Shs 30.3bn of which Shs 2.5bn had not been submitted to the Fund by closing of the reporting period,” the report reads in part.
Analysing the audited reports from the Petroleum reveal a trend of withdrawals that the Office of the Auditor General (OAG) has sometimes described as irregular. For instance, a report for 2017 reveals that in November, 2017 Shs 125 billion was transferred from the Petroleum Fund to the consolidated fund to finance budget. Another Shs 200bn was also withdrawn from the Fund to the consolidated fund to finance 2018/2019 budget priorities.
The Auditor General in a report to parliament described the withdrawal as irregular since it didn’t follow the procedures and processes laid down in the Public Finance and Accountability Act, 2015. The same Act, ring fences oil revenues to finance only infrastructure projects following an Appropriation Act.
BANK ACCOUNT IN NEW YORK
The Petroleum Fund is maintained in two separate accounts in the Bank of Uganda (BoU) –one account denominated in Uganda Shilling (UGX) and another in United States Dollars. “Another account was opened in the Federal Reserve Bank of New York to facilitate investments of the fund under the Petroleum Revenue Investment Reserve,” the report reads in part.
The Africa Mining Vision (AMV) is a policy framework established by the African Union in 2009 to promote equitable, broad-based development through prudent exploitation and utilization of the continent’s natural wealth.
The ambitious goal of the AMV is “to foster transparent, equitable and optimal exploitation of Africa’s mineral resources to underpin broad based sustainable growth and socio-economic development.”
The AMV is labeled ambitious as it calls for the creation of ‘a regime of responsibility for natural resource extraction in African countries.” This means it addresses key areas of interest that have long cast a spotlight on the exploitative nature of conducting business between multi-national companies and governments where the former are associated with hemorrhaging of the continent’s resources through tax evasion coupled with illicit financial flows from the mineral sector and the later mortgaging their countries’ resources in unfair selfish contracts shrouded in non-disclosure agreements.
This cocktail of issues often leaves the countries’ citizens wallowing in poverty as the mineral resource wealth does not translate into opportunities and social economic development.
The AMV is described as a game changer in the continent’s mineral sector, according to Oxfarm, in their 2017 briefing paper, From Aspiration to Reality: Unpacking the AMV, as it “comprehensively addresses the challenges associated with harnessing Africa’s mineral resources for sustainable development, while striving to reflect global norms for the equitable governance of the natural resources sectors.”
Ideally the AMV addresses six major areas of intervention namely; improving the quality of geological data which leads to fairer deals and more equitable returns on mineral sector investments; contract negotiation capacity; resource governance; management of mineral wealth; addressing infrastructure constraints; and elevating artisanal and small scale mining by acknowledging its developmental role thereby harnessing this potential through formalization and integration into local and regional economic development.
AU member states are required to adopt the AMV fully, align national mineral sector policies with the provisions of the framework and implement it through derivative policy instruments including the Country Mining Vision, African Mineral Governance Framework and Compact with the Private Sector – while maintaining an integrated, strategic vision for national development.
Experts however say the slow pace of implementation of the AMV since its inception risks failing its major aspirations. The Brief cites that there is low awareness of the potential opportunities for the AMV to address grievances in communities experiencing the negative environmental and social effects of mineral extraction.
Notably, civil society, which has been at the forefront of struggles to put Africa’s mineral sector at the heart of strategies for inclusive, equitable development is making baby steps towards mobilising to engage with the national implementation of the AMV in terms of grassroots mobilization and policy advocacy in Uganda.
In promoting strategies for inclusive, equitable development civil society has been urged to popularize the AMV’s goals of: recognizing the contribution of artisanal and small-scale mining (ASM) to local economic development, and promoting women’s rights and gender justice; advocating for a progressive fiscal regime to curb the hemorrhaging of the continent’s resources through tax evasion and avoidance plus illicit financial flows from the mineral sector thereby promoting transparency in the management of mineral resource revenues and the accountability of states and corporate actors in their relations with mining-affected communities and citizens; upholding the principle of free, prior and informed consent (FPIC) for mining-affected communities; and addressing the social and environmental impacts of mining.
As with a number of non-governmental organisations across, ActionAid International Uganda runs a specific project on Extractives Governance and works with several stakeholders in the sub sector, particularly artisanal and small-scale miners (and government) to uphold and promote the AMV.
Chris Musiime who works with African Centre for Mineral Policy says that there is a lack of a sense of ownership of the AMV concept by Ugandan NGOs and non-alignment with oil and gas which they consider a hot topic at the moment.
“Although the AMV can be perceived as universal in terms of resource management, it remains hugely biased towards mining. At the time it came about, mining was not a big deal here and almost all NGOs were concentrating on oil and gas. Thus it was not an easy fit into the NGO work at the time. If you recall, many NGOs including ActionAid were mad about EITI but never mentioned AMV yet EITI principles are generally represented in the AMV,” he said.
He contends that Civil society needs to familiarise themselves with the AMV first of all, how it came about, why Uganda signed up, and the particular role set aside in the AMV for civil society then pick out what applies to Uganda and set on developing a country specific document for Uganda.
“With the new Minerals Policy, Petroleum Laws and on-going review of the Mining and Minerals Act as well as Uganda accepting to join EITI, CSOs have to remain updated with all these processes if they are to remain relevant. Secondly, they should follow up with the Government Department responsible for the domestication of AMV, am not sure if it’s MOFA or MEMD or both. Gain networks there and understand the challenges they have and see how to help them. AMV domestication cannot be done by NGOs alone. It has to be a partnership.”
Didas Muhumuza, the Manager Extractives Governance Project at ActionAid International Uganda says the project has already embarked on some work around the AMV. He views that the AMV is a top-bottom high level initiative whose formulation and development did not include comprehensive stakeholder consultations and engagement. “It thus requires practical domestication through local involvement and participation by stakeholders in the derivation of the framework. The only opportunity available now is to ensure that the derivation of the Country Mining Vision for Uganda is done through a bottom-up process to enable realistic consideration of the local stakeholders concerns,” Muhumuza emphasized.
There are takeaway points for the civil society to do more about actualizing the AMV as outlined in the brief by Oxfam.
‘Civil society should proactively engage in policy advocacy, research and analysis of the AMV, focus on civic space and social participation, women’s rights and gender justice and environmental plus social sustainability, in order to elicit policy reforms by African governments and the Pan-African policy institutions to address the shortcomings in the framework,” it says.
It also urges stakeholders (especially Civil Society actors to undertake popular campaigns to raise awareness of the AMV and its benefits to African citizens and mining-affected communities, to ensure that the interests of non-state actors are addressed in the Country Mining Visions.
By Robert Mwesigye
Edited by Flavia Nalubega
Edited by Didas Muhumuza
In the aftermath of the ruthless eviction of Artisanal and Small-scale Miners (ASMs) from the gold mines in Mubende District on August 3, 2017, President Museveni said he had not given the directive but rather had only told the soldiers and other security agencies to be on standby. Victims of that unforgettable day recount how security personnel had told them that the deployment was to support the process of registering the miners. “However, when I awoke that morning I looked around the mines and it looked like a scene from a war movie. Tanks had been stationed on hill tops facing us. That day I thought there was war,” recounted Emmanuel Kibirige, an artisanal gold miner who has been involved in the trade for the last about 12 years. That and many more stories of pandemonium have severally been told by thousands of victims who were given a two-hour ultimatum by the operations Commander of the day to vacate the mines. In the ensuing chaos, property and cash worth billions of shillings were lost in a very short time. Mubende vis a vis Other gold mining areas of Uganda Artisanal gold mining in Uganda takes place majorly in areas of Mubende, Busia, Namayingo, Buhweju, Karamoja and Bugiri. Whereas the 2006 geophysical aerial survey was not carried out in Karamoja owing to insecurity, gold mining is mainly attributed to speculators. As such gold rushes are common in the sub-region as miners shift from place to place and, according to the Acting District Natural Resources Officer of Nakapiripirit, some mining companies that operate are not known whether they possess licenses or not. Elsewhere, artisanal miners and big players such as mining companies have secured licenses to operate hence a semblance of order albeit a few cases of displacement and poor compensation of locals. In Busia for example, where the gold mining trade, that dates back to the 1930s, has run in families across generations, there are about 456 location licenses held by artisanal miners who are mostly natives. Vincent Kedi, the Principal Mining Engineer at the Directorate of Geological Survey and Mines (DGSM) noted that ASMs in Busia are more organized which helps to facilitate the process faster. “Whereas we have sensitized miners across the country about existing mining procedures, people in Busia are the only ones that have taken heed. The moment they discover an area with gold they immediately embark on processing a location license,” he said. In comparison however, Mubende is challenging. Over 90% of the people that operated in the mines were not natives which explained the population of more than 50,000 people. These included foreigners from neighbouring countries mainly DR Congo, Rwanda, Tanzania, Kenya and Burundi. Interestingly, artisanal gold mining in Mubende dates as far back as the 1980s, according the Kitumbi Sub-county Community Development Officer, Edward Ssenkusu, also a born of the area. “Around 1989, I always heard my father one Ssemanda Edward say that he was going to the mines at Kamalange and on several occasions, while visiting my aunt Nankusu, I passed Kamalange wetland and saw men carrying sacks of sand which contained the gold deposits,” Senkusu says. However, Gertrude Njuba, a bush war heroine, claims she first acquired this gold mining area of Mubende in 1986, “without the slightest hint of what lay underneath,” according to reference of an interview by the Daily Monitor. Her company first acquired a location license for the area measuring about 207 square kilometers in 1987, and subsequently a mining lease for the area in 1994. Battle of licenses During a handover ceremony of safety gears to members of Singo Artisanal & Small Scale Miners Association (SASSMA) miners by ActionAid Uganda in 2016, the spokesperson then John Bosco Bukya said they had applied for location licenses in 2013 but were yet to get a response. However, records at the DGSM indicate that the area for which the miners had applied, having already been working there without a license, was licensed to AUC Mining (U) Limited on 20th February 2013, having applied on 22nd October, 2012. The area measures 144.7824 square kilometers. The miners however argued that the original company, Gemstone International, originally had an exploration license for the area, whose duration was three years, of which upon expiration the company was expected to relinquish 50% of the area. Effectively, the company had not done any exploration because the miners occupied the area. In a dossier by AUC Mining U) Limited presented to the President making their case as the rightful licensed party for the disputed area, they indicated that the miners had interfered with their work where they had marked sample sites from which they extracted data. “The miners actually started invading the area after discovering the company had discovered samples of gold. The local people that were employed during these geophysical studies spread the word and people started flocking the area,” Kedi said. Anthony Kinene, the Natural Resources Officer of Mubende and borne of the area, says the first official report of artisanal gold miners in Mubende was in 2012 when the numbers became astronomical. According to the dossier, the company had spent close to 57 billion shillings on geological activities and paid at least 100 million shillings in taxes. Politics, security concerns In the aftermath of the evictions, miners said the President had betrayed them and he occasionally made verbal pledges that Mubende miners were safe and would continue to work without interference. John Bosco Bukya said that during the President’s state of the nation address of 2016, he had given them assurance that they were safe and would continue working. Following the evictions, the desperate miners said the president had all along been using them as political capital. Word of impending evictions came in early 2017 when there was a reported directive from the President for the miners to vacate the mines. On two occasions, the area Members of Parliament including Hon. Betty Namugwanya and Hon. Patrick Nsamba coordinated meetings to have the president visit the area and speak to miners but to no avail. Legally however; the miners save for those belonging to Kayonza-Kitumbi Miners Association who were already licensed, were not supposed to be occupying the mines. The then Permanent Secretary of the Ministry of Energy and Mineral Development, Dr. Stephen Isabalijja claimed during a stormy session before the committee on natural resources in parliament that the miners posed a security threat and government had to act fast. Claims of wrong elements posing as miners had been rife. Indeed among the over 70 people arrested during the evictions that were seen by a legal team assembled by ActionAid Uganda, nearly all were found to be foreign nationals from neighbouring countries. Making a come back The evictions sparked outrage countrywide but unsurprisingly the President would give the miners an ear. The first attempt to meet him during an address on radio in Mubende flopped when he promised them a meeting at a more appropriate time. Indeed on September 26th 2017, the meeting happened at State House, Nakasero where security officials led by then Inspector General of Police, Gen. Kale Kayihura; energy ministry officials and miners’ representatives convened at what turned out to be a heated affair between the miners and representatives of AUC Mining Company. The company representatives were unrelenting and would not back down even when the President asked Moses Masagazi, a partner in AUC Mining company, to relinquish part of the area to the miners. It is reported that during the meeting, the company representatives claimed that they had to be compensated with Shs 2 billion for a 10 square kilometer area in Madudu Sub-county that had been proposed for relocation of the miners. As the technocrat on ground, Anthony Kinene disputed the claim, adducing proof that the proposed area was never part of that license. Following protracted negotiations, the President directed Hon. Irene Muloni, the Energy Minister that AUC Mining relinquishes 30% of their area to the miners. There was however a hitch, when it turned out that the letter was addressed to an unknown group of miners posing as the Federation of Artisanal Miners of Uganda. On investigation it was discovered the federation was in fact headed by the late Stella Njuba, daughter to Gertrude Njuba. Fresh Fight The miners, under their umbrella association, Mubende United Miners Association (MUMA) which brings together 21 associations had to put up a fresh fight, which however culminated into fresh negotiations and later concessions to share just 10% of the 30% because by now they were running low in energy and desperate to return to work. Gradually the miners started to make a breakthrough, with their major milestone being a meeting with the Operation Wealth Creation boss, and the president’s young brother Gen. Salim Saleh at Serene Hotel in Mutundwe. According to Bukya John Bosco, the meeting was very cordial and Gen. Saleh pledged that the miners would soon resume work. “We are now in advanced stages of receiving location licenses as members of MUMA; everything is in order now after we came to an understanding with the Federation,” the MUMA Chairperson Bukya John Bosco said. The negotiations through different power holders paid off as the miners were eventually granted permission to return to Kasanda district mining gold areas, specically in Katugo, Kitoma, and Nfuka all located in Kitumbi sub-county. They have secured 15 location licenses and expect about 15 more, which puts them in a safe position to resume mining legally. By Robert Mwesigye Edited by Flavia Nalubega Edited By Didas Muhumuza
Tullow is set to sell a substantial part of its assets in Uganda to Total E&P Uganda and CNOOC Uganda – a farm-down that attracts capital gains tax.
President Yoweri Museveni and the Chief Executive Officer (CEO) of Tullow Oil plc have agreed a deal that will enable oil company enjoy a phased payment of capital gains tax accruing from the sale of part of its assets in the Albertine graben. Tullow Uganda Ltd –a subsidiary of Tullow Oil plc in January 2017 announced the sale of a substantial part of its assets in Uganda to Total E&P Uganda and CNOOC Uganda Ltd in a farm-down that attracts capital gains tax.
According to Tullow Oil plc’s full year statement, the Chief Executive Officer of Tullow Oil plc, Mr Paul McDade and President Yoweri Museveni met on January 19th, 2019 in which the issue of capital gains tax from the sale of part of the company’s assets in Uganda was discussed. The 30-page company full year results report was released on February 13th, 2019. The meeting was also attended by the CEO of Total S.A. In the meeting, Tullow Oil agreed the principles for Capital Gains Tax on its $900 million (approximately Shs 3.3 trillion) farm-down to CNOOC Uganda and Total E&P Uganda. Cabinet gave Tullow Oil’s farm-down to Total E&P Uganda and CNOOC Uganda a green light. “Following meetings in January 2019 between the CEOs of both Tullow Plc and Total S.A, and President Museveni of Uganda, the government and the Joint Venture Partners are now engaged in discussions to finalise an agreement reflecting this tax treatment that will enable completion of the farm-down to take place,” the financial statement reads in part.
The report adds, “Any Capital Gains Tax is expected to be phased and partly linked to project progress. At completion of the farm-down, Tullow anticipates receiving a cash payment of $100 million and a payment of the working capital completion adjustment and deferred consideration for the pre-completion period of $108 million.”
A further $50 million of cash consideration will be made and is anticipated to be received when the Final Investment Decision is taken on the development project, possibly mid this year or thereabout. The deal is meant to avoid a possible dispute between government and Tullow Oil over the payment of the capital gains tax. In 2012, Tullow Oil was embroiled in a dispute with the tax body – Uganda Revenue Authority over payment of capital gains tax following the farm-out by former Heritage Oil Uganda in favour of Tullow Oil Uganda, which led to protracted litigation. Uganda came out as the victor and the payment was effected accordingly.
Final Investment Decision (FID) The report also notes a delay by Joint Venture Partners to reach a Final Investment Decision (FID). “The joint venture partners – Tullow Oil Uganda, Total E&P Uganda and CNOOC Uganda continue to work towards reaching FID for the development project around mid-2019,” the report reads in part.
Mark MacFarlane, the Executive Vice President of Tullow Oil for East Africa noted in the report, “This year the East Africa team will be driving hard towards two Final Investment Decisions on our East African projects which have the potential to deliver over 50,000 barrels of oil per day of net production to Tullow by the early 2020s,” he said. Mark MacFarlane emphasised that Tullow’s East Africa team is making good progress on delivering the potential the projects offer. Edward Ssekika Edited by Flavia Nalubega Edited by Didas Muhumuza Oil.Uganda@actionaid.org
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
Muloni Tables Kanywataba Oil Agreement before Parliament signed with Armour
Gov’t earns Shs 1 bn in signature bonus for Kanywataba oil block
Government of Uganda signed a Production Sharing Agreement (PSA), and issued a License for Petroleum Exploration, Development and Production over the Kanywataba Contract Area with Armour Energy Limited (AEL) from Australia. The exploration license was signed on Thursday, September 14 at Amber House in Kampala. Energy Minister, Irene Muloni signed on behalf of government, while Armour Energy Limited was represented by its Chief Executive Officer. The Kanywataba Contract Area is located in Ntoroko district.
Eng. Irene Muloni, Minister of Energy and Mineral Development said, “This is the first Production Sharing Agreement to be signed in line with Section 58 of the Petroleum Exploration, Development and Production Act 2013, the Legal regime under which I announced the First Competitive Licensing Round during February 2015” Muloni said.
She added, “A signature bonus together with research and training fees, and annual acreage rental fees for the first exploration period amounting to US$ 316,000 have been paid to the Uganda Petroleum Fund”.
The Kanywataba exploration license has an acreage of 344 square kilometers for four years split into two periods of two years each. Muloni said, a minimum work program which includes acquisition of seismic data and drilling of at least one well.
Muloni said, the PSA provides for a requirement to train and employ suitably qualified Ugandan citizens has been provided for in addition to payment of annual training fees to government.
“The award was cleared by Cabinet and the Ministries of Finance, Planning and Economic Development together with that of Justice and Constitutional Affairs. The Minister also said that on Friday 8th September 2017, Cabinet approved the award of two licenses in the Ngassa block and that the agreements would also be signed in a few weeks’ time,” Muloni said.
Weighing in on the exploration license, Robert Kasande, the acting Permanent Secretary, Ministry of Energy and Mineral Development, added that one of the major achievements from this licensing round was the development of a state of the art data room which remains open to the industry to view and purchase data, and will also be used for future licensing rounds.
“The Ministry was able to generate $ 2.4 million United States dollars (Approximately Shs 8 billion) from the sale of data to bidders which was paid to the Uganda Petroleum Fund”, he said.
Uganda’s first licensing round covered six blocks with a total acreage of 2,674 Km2 in the Albertine Graben, Uganda’s most prospective sedimentary basin. Out of the nineteen (19) applicants at the Request for Qualification Stage, sixteen proceeded to the Request for Proposal stage and four emerged successful and proceeded to the negotiations stage. This first licensing round was undertaken in line with the National Oil and Gas Policy for Uganda (2008) and in accordance with the Petroleum (Exploration, Development and Production) Act 2013.
The signing of a Production Sharing Agreement and an award of exploration license bring the number of companies in Uganda’s petroleum industry to four – Total, Tullow, Cnooc and now Armour Energy Limited.
PSA tabled before Parliament
Later, in a move to enhance transparency in the oil and gas sector, the minister tabled before Parliament Production Sharing Agreement (PSA) signed between the government of Uganda and Armour Energy Limited – Australian oil company, over Kanywataba oil block in Ntoroko district.
The oil sector unfortunately remains shrouded in secrecy. The previous Production Sharing Agreements between government and oil companies have been under key and lock and neither accessible to Parliament not the public. A court case filed by two journalists Charles Mwanguhya Mpagi and Angelo Izama to have the oil agreements made public didn’t yield any results.
The Minister also tabled before parliament the Intergovernmental Agreement between the government of Uganda and the United Republic of Tanzania on the crude oil pipeline outlining the contents of the agreement.
Under the Petroleum Act, 2012, the Minister of Energy and Mineral Development is mandated to furnish parliament with periodic reports about the oil and gas sector.
After tabling the report, the opposition Chief Whip Ibrahim Semujju Nganda moved a motion that the report be differed for further consideration. “We shouldn’t rush through a report of this significance to the country. It is important that Members of Parliament discuss the report, when the atmosphere is peaceful and conducive for discussion not that of intimidation,” Semujju who is also the Kira Municipality MP said.
On his part, Stephen Birahwa Mukitale (MP Bulisa), dismissed Muloni’s report as lacking. “The report is devoid of figures, it is devoid of the budget, deadlines, how can we talk of oil and even have first oil by 2020 without a budget and deadlines,” he wondered.
He added, “We need a matrix spelling out the role, budget and responsibility of each and every ministry and department in the oil sector, because this is a multi-sectoral sector, if we are to have first oil by 2020,” Mukitale proposed. Kadaga asked the minister to avail the matrix to the committee.
He said it is wrong for the Minister of Energy and Mineral Development to purport to speak for the Ministries of Water and Environment, Works and Transport and Uganda National Roads Authority (UNRA) and accused the minister of lack of coordination. “There is no road contractor in Bulisa, don’t take us for granted. Other ministries don’t have a budget for oil and gas activities. The president talked about a budget cut of 10 percent from every ministry to finance oil and gas activities, where is that money,” he wondered.
Prof Morris Ogenga Latigo (MP Agago North) wants the previous oil agreement to also be tabled before parliament and MPs allowed access. “I wish the minister could table Production Sharing Agreement for oil blocks where we have already discovered oil,” Ogenga wondered.
Ogenga who is also the chairperson of Acholi Technical Working Group on oil and gas implored fellow lawmakers to read and scrutinize the Kanywataba Production Sharing Agreement warning them that if parliament doesn’t provide oversight for the sector, then the country would be in trouble.
Speaker, Rebecca Kadaga, referred the Minister’s report and the Kanywataba oil agreement to the Committee on Natural Resources to scrutinize the report and report back to parliament. However, no time line was given on when the committee is supposed to report.
About Armour Energy
Armour Energy Limited focuses on the discovery and development of natural gas and associated liquid resources in Australia. Armour Energy Limited was founded in 2009 and is based in Brisbane, Australia. It has 100% interests in the McArthur, South Nicholson, and Georgina Basins covering an area of 33 million acres in the Northern Territory and Queensland; and interests in the onshore Gippsland Basin, Victoria in joint venture with Lakes Oil NL. The company, through its subsidiaries, also holds interests in 7 exploration permits for minerals in Queensland among other oil and gas exploration works.
The three joint venture partners operating in the Albertine Graben have launched the Front End Engineering Design (FEED) studies for Nwoya and Buliisa oil fields in a bid to fast track oil production by 2020. Total E&P Uganda , Tullow oil and China National Offshore Oil Corporation (CNOOC) signed the pact yesterday (February 14, 2017) at Sheraton Hotel in Kampala and was witnessed by Minister for Energy Eng. Irene Muloni, Mike Cleaver Vice President of Chicago Bridge and Iron Company(CBI) , Ashley Rees Managing Director of Fluor and Maxine Mikoyan Vice President of Technip.
Technip, Fluor and Chicago Bridge and Iron Company (CB&I) are the three international contractors that were awarded the contract to undertake the first phase of FEED design completion for a period of six months. Upon successful completion, the two best companies will be invited to compete for Engineering, Procurement and Construction contract. The FEED studies which will cover Exploration Area 1 (EA1) in Nwoya and Exploration Area 2 (EA2) in Buliisa respectively are expected to outline technical aspects of the oil fields (design of trunk pipelines-crude feeder pipelines, Central Processing Facilities which is the most critical infrastructure since it is like ‘first refinery’ and other attendant infrastructure), costs estimates and schedules of implementation of the production phase. According to Energy Minister, Eng. Irene Muloni, who was present at the signing of the design engineering studies framework, Uganda’s target of having first oil remains 2020. “We gave the joint venture partners up to the end of this year (December 31, 2017) to make a Final Investment Decision (FID); a decision on whether to invest or not to invest in our country,” she said, adding that government expects the oil companies to abide by the agreed deadline as penned on the production licenses awarded last August. “Joint venture partners have sunk in over $ 3 billion for the last 10 years. So they are also looking forward to recouping their investment and everyone is asking government why it is taking us forever to get out oil out of the ground,” she noted. Therefore, Final Investment Decision (FID) by the end of 2017, and ‘first oil’ by 2020, must become a reality, Muloni emphasized.
Speaking on behalf of the joint venture partners, General Manager Total E&P Uganda, Adewale Fayemi explained that FEED studies will allow the joint venture partners to make a Final Investment Decision (FID) before the end of this year as per the contracts signed with government of Uganda. “This is a milestone in the country’s journey towards oil production by 2020. We are currently preparing a call for tender for enabling infrastructure design work which is expected to be awarded in May, 2017,” Adewale told Oil in Uganda. He further revealed that the FEED studies will however not include the kingfisher area operated by CNOOC-this is yet to be launched.
The enabling infrastructure are works required ahead of major engineering and construction work including local access, site preparation, fencing and similar tasks for which Ugandan companies are expected to be involved. Exploration Area 1 and 2 will require at least one CPF located in Buliisa district and will have capacity to produce 200,000bpd. The second CPF will be located in the Kingfisher area and will capacity to produce 30,000bpd. In total, the country expects to produce 230,000 barrels of oil per day, out of which the refinery will require 30,000 barrels while the 200,000 barrels will be exported through the East African Crude Oil Pipeline. Last month, the governments of Tanzania and Uganda launched the Front End Engineering Design (FEED) study for the East African Crude Oil Pipeline Project ( EACOP) which is expected to be completed after eight months.
Report by Edward Ssekika.
The Democratic Republic of Congo (DRC) has formally expressed interest to join the East African Crude Oil Pipeline Project (EACOP), Oil in Uganda has established.
Uganda and Tanzania plans to construct a 1,445 km long, 24-inch diameter, heated pipeline to provide access for Uganda’s crude oil to the international market.
Uganda’s Minister of Energy and Mineral Development, Irene Muloni noted that Democratic Republic of Congo government is considering EACOP as an alternative route to access the international market for its crude from newly discovered oil resources in the eastern part of the country.
“The DRC government has formally expressed interest to join crude pipeline project. They see it [EACOP] as an alternative route for their crude to the market,” she said, while launching the Front End Engineering Designing (FEED) for the crude oil pipeline project recently.
An American Company Gulf Interstate is conducting the FEED study that is expected to provide the actual designs, costs and route for the crude oil pipeline. The study that was launched early January 2017 is expected to be completed within 8 months.
Muloni explained that when they (Uganda and Tanzania team) was inspecting the Tanga port last year, they were joined by an official delegation from the Democratic Republic of Congo’s Ministry of Hydrocarbons, and the delegation expressed interest to participate in the crude oil pipeline project.
“This is potential route for them to access the international market,” she explained. This means DRC government, if admitted will be expected to acquire a stake in the EACOP and pay a tariff of $ 12 dollars per every barrel of crude oil transported through the pipeline.
The Democratic Republic of Congo (DRC) has so far discovered 3 billion barrels of oil around Lake Albert Eastern and part of the country, which neighbors Uganda. However, it is yet to be confirmed how much of the 3 billion barrels is recoverable. It is therefore cheaper for DRC to transport its crude through EACOP and the Alternative being construction of a 6,500 kilometer long pipeline running though the vast jungles to the country’s western coast line.
Last year, Giuseppe Cicarelli, the Chief executive officer of Oil of DRCongo, one of the companies exploring for oil in Eastern DRC, said access to the least cost option to get crude to the international market is vital to the next round of investment the company is supposed to make.
“Oil of DRCongo is actively working to find viable solutions for the future evacuation of the crude oil from block I and II of Lake Albert, having already completed an extensive seismic campaign,” he said. Oil of DRCongo, operates two blocks around Lake Albert.
DRC’s expression of interest follows, President Museveni recent appeal to his Congolese counterpart, Joseph Kabila to consider joining the northern corridor projects, in particular the East African crude oil pipeline.
French oil giant, Total S.A is one of the companies exploring oil in northeastern DRC. Total holds 66 percent stake in Block 3, located along Lake Albert alongside with South Africa’s SacOil.
Total ‘has 54.9 majority stake in Uganda’s’ following a partial farm- down with Tullow, though the transaction awaits government approval. With oil exploration activities in DRC, a controlling stake in Uganda’s oil fields and interests in Tanzania’s oil exploration activities, it makes economic sense for the company to push DRC government to join EACOP.
Total has already indicated its willingness to finance to the crude oil pipeline is likely to be the biggest financier of the crude oil pipeline.
Report by Edward Ssekika
President Yoweri Museveni has defended the ‘oil cash bonanza’ in which 42 top civil servants and government officials were rewarded Shs. 6bn for their role in defending the oil tax cases in both Uganda and London.
The President said the oil cash bonanza; now commonly known as ‘presidential golden handshake’ was deliberate and did not break any law.
“I reject that I did anything wrong. I’m very proud of these young people,” he reportedly told National Resistance Movement Members of Parliament on Tuesday while addressing a caucus meeting at State House Entebbe.
In anticipation of a heated debate in parliament over the oil cash payouts, Museveni said that the Tullow-Heritage case was no ordinary case and castigated Members of Parliament for insulting ‘good people’.
“It was an international war, which the lawyers and the tax ladies [Ms. Allen Kagina and Ms. Akol Doris won amidst pressure, challenges and the temptations that they faced,” he said.
Other officials who benefited from the ‘presidential golden handshake include; former Permanent Secretary in Ministry of Energy, Fred Kabagambe Kaliisa, former URA’s head of legal affairs and ED KCCA, Jennifer Musisi, Secretary to the Treasury Keith Muhakanizi, former Attorney General Peter Nyombi and his deputy, Fred Ruhindi, Lawrence Kiiza from Ministry of Finance, Ernest Rubondo, the Executive Director of PAU, Francis Atoke, the Solicitor General, lawyers; Ali Ssekatawa (URA), Martin Mwambutsya (then State Attorney), Peter Muliisa among others.
Museveni told Mps that during court proceedings of the case, he was approached by many people who advised him to settle the issue outside court, because Uganda was likely to lose a lot of money. He explained that he was strengthened by the Ugandan team that they were going to win the case – and it was through that background that he decided to thank the team.
“If the support staff were part of the big war that saved Uganda trillions and gained $ 451m, if they get shs,50 million for their first time in life, it is okay. It was their luck and they were part of the war,” Museveni told Mps.
He defended his action arguing that in the last 30 years, he has given a monetary ‘handshake’ twice.
He explained that the first ‘golden handshake’ was in 2006 when he gave out $20,000 to a group of scientists in the Ministry of Energy and Mineral Development when they discovered oil and the second one being the Oil cash bonanza.
However, he said the only thing that could have gone wrong is that the list of beneficiaries could have been inflated behind his back.
“Perhaps there is a possibility that the list of beneficiaries was infiltrated and other names included. This has to be investigated,” he noted.
Report by Edward Ssekika.