public dialogue on petroleum bills 24 by shem byakagaba dialogue on... · the petroleum...

Public Dialogue on Petroleum Bills At Uganda Museum

24th, May, 2012

By Shem Byakagaba

Legal Consultant

Executive Director, KHEDA

Contacts: Mob. +256 772 433440 [email protected]

Shem Byakagaba - Public Dialogue on Oil Bills

Presentation outline Introduction

Constitutional provisions

The National Oil and Gas Policy

The Petroleum (Exploration, Development and Production) Bill 2011

Institutional arrangements

Licensing

The Mid stream Bill

General comments

Recommendations


Introduction

Uganda has discovered huge commercial quantities of oil and gas which has attracted attention of national and international actors.

The country has made many strides in exploration and production is about to be undertaken.

Oil & Gas Exploration in the Albertine Graben


Introduction cont…

The legal framework is still weak, i.e., the Petroleum (Exploration and Production ) Act, Cap 150.

Uganda passed the National Oil and Gas Policy which is yet to be enabled by law.

Oil is a unique, finite resource with a lot of positive and negative impacts on the socio-economic equilibrium of a country. It needs special regulation.


Article 244 of the constitution

244(1) Subject to clause (2) of this article, Parliament shall make laws regulating:

a. The exploitation of minerals,

b. The sharing of Royalties,

c. The conditions of payment of indemnities arising out of exploitation of minerals and

d. The conditions regarding the restoration of derelict lands.

Shem Byakagaba - Public Dialogue on

Oil Bills

Constitution contd…

Art 244(2) provides that:

Minerals and mineral ores shall be exploited taking into account the interests of the individual land owners, local governments and the Government.


The national Oil and Gas Policy, (NOP)

2008

Section 5(1) lays down the guiding principles in the development of the oil and gas in Uganda;

a) Using finite resources to create lasting benefits

b) Efficient resource management

c) Transparency and accountability

d) Competitiveness and Productivity


NOP cont’d…

e) Protection of the environment and conservation of the Bio-diversity

f) Spirit of cooperation

g) Capacity and institutional building.

NB: The objectives of the policy are consistent with the guiding principles of the NOP


Oil Bills

NOP cont’d...

The NOP provides for the following regulatory framework;

Parliament

Cabinet

Ministry responsible for oil and Gas

The Petroleum Authority of Uganda (PAU)

National oil Company

MDAs

Civil society and Cultural institutions


Oil Bills

The Petroleum (Exploration, development and

Production) Bill 2012

The Bills objectives are inter alia;

To give effect to Art 244

To regulate petroleum exploration, development and production

To establish the Petroleum Authority of Uganda

To establish the National oil company

To regulate the licensing and participation of commercial entities, etc


The purpose of the Act

The purpose of the Act is to operationalise the National Oil and Gas Policy by:

Creating a conducive environment for the efficient management of petroleum resources

Establishing institutions to manage the petroleum resources

Regulating petroleum activities Providing optimal social economic benefits Ensuring public safety and protection of

public health and environment. Supporting the development of state

participation and national content.


Oil Bills

Institutional arrangements

Clause 9 establishes the functions of the minister to include:

Granting and revoking a license

Initiating legislation, etc

Negotiating petroleum agreements

Approving data management systems

Any other function incidental or consequential to his or her functions


Comments on the Minister

The minister is loaded with too many functions and powers notwithstanding the many institutions created.

There is need to nurture and harness the young technical institutions without undue influence from the political class

The Bill does not provide for the institutional checks against the powerful minister!!!


The Petroleum Authority

The Bill establishes the Authority to monitor and Regulate exploration, development and production of petroleum in Uganda

It is a body corporate with wide ranging functions BUT mainly playing an advisory role to the minister!!!


Independence of the Authority

Clause 14(1) provides that;

“The minister may give directions in writing to the Authority with respect to the policy to be observed and implemented by the Authority, and the Authority shall comply with those directions”

Clause 15 states;

“The Authority shall subject to section 14(1) be independent in the performance of its functions duties and exercise of its powers.”


Comments..

The Authority is subsumed under the minister and the independence given under one hand is taken away by the other!!

This is compounded by the minister being the appointing Authority of the Board and the recipient of the Authority’s reports.


The National Oil Company (NOC)

Clause 41 establishes the NOC to be incorporated under the Companies Act to manage Uganda’s commercial aspects of the petroleum activities and the participating interests of the state in the petroleum agreements.

KEY: The Bill does not state the detailed nature of the

company, the shareholding, directorship and

management. Will Parliament have an input at the stage of incorporation?


Licensing

The Bill in clauses 48– 92 provides for;

Reconnaissance permits

Petroleum exploration license and

Petroleum production license

Production permit


Licensing cont’d

In all these stages, the minister is the responsible person with the advice of the Authority.

There are no other Agencies as envisaged under the Oil Policy that are involved.

The role of Cabinet and Parliament ought to be highlighted.


The Petroleum ( Refining, Gas

processing and Conversion,

Transportation and storage) Bill,

2012

This is the mid stream bill to deal with refining, processing, transportation and storage.

Its key to understand the relationship between upstream and midstream through the linkages.


Mid stream contd….

This presents diverse environmental concerns through the refinery, pipelines, and other forms of transportation

The socio-economic impacts especially on land spread all over the country needs to be assessed

Is the country and the NOC for equity participation or a mere observer participant?


Mid stream contd…

Oils spills occur most at this stage

What will happen to the infrastructure after oil? Decommissioning under mid stream is more complex!

What is the country’s capacity not only to participate, observe but more importantly to regulate?

We need to agree what to put in the Act, Regulations and Agreements.


State participation and National

Content

The Bills provides for areas of state participation and national content which include;

Participation in petroleum activities.

Provision of goods and services by Ugandan entrepreneurs.

Training and employment of Ugandans

Training and technology transfer


State participation contd…

Issues:

What is the capacity of the local companies/ entrepreneurs to participate?

The Bills do not obligate the licensee on the magnitude of the local content and the duration of achieving this.

There is no distinction between “National” and “host community” local content.


Environmental Issues

The Bills do not sufficiently provide for detailed environmental requirements. These may be covered under the current environmental laws which are inadequate in as far as they were not cognizant of oil exploration and production.

There is a requirement to comply with the general environmental principles. The second bill singles out waste management; why? Its hoped that the different environmental laws will soon be amended to bring them in tandem with the industry developments


Why bother about environment

mitigations?

All across the Niger Delta exposed oil pipelines like these criss-cross

communities. Decisions on the laying of these pipelines were taken

without consulting these communities. Now ageing, many of these

pipelines have become fire-traps.


A ruptured pipeline unattended to. After three months there

was a massive fire outbreak that claimed over 50 lives.

Why bother about Environment Mitigations?


Access to Information Whereas clauses 149 to 151 emphasize

confidentiality in the industry, there is need to recognize that secrecy and general lack of transparency leads to lack of Accountability and the corruption that has defined the industry all over the world.

There should be specific mechanisms for the different bodies and the public to access information. The provisions of the Access to information Act should not be qualified by this Bill.


General Comments

The role of parliament is conspicuously absent!

Where is the role of regional and district leadership?

Whereas the Oil policy provides for the role of civil society, the Bills are silent.

Where is the role of the Kingdom?


Stabilization Clause 188 stabilizes pre existing contracts

However, there is no specific provision for stabilization on other issues. These normally would include changes on the general legal regime, environment laws, fiscal policies, etc.

Will these be dealt with in the individual agreements? Best practice requires to have them regulated in the Act to avoid arbitrariness.


Recommendations In order to realize the aspirations of

Ugandans, there is need to have an effective and efficient institutional framework to manage the whole value chain of the petroleum industry

Parliament as the representative of the people and the

chief oversight Agency, MUST play a role wider than

legislative. It needs to RATIFY all agreements that the

country enters into. It MUST also receive and discuss

reports from the sector institutions


Recommendations cont’d..

Given the importance of the petroleum resource to this country, all Agreements and licenses should be approved by Cabinet. This provides a check on the line ministry and the other Agencies that are involved in the industry.

The Ministry of Energy should through its strengthened structures coordinate the policy, legislation, licensing, and negotiation of Agreements


Recommendations cont’d.. The Petroleum Authority should be established

with independent and adequate powers to

monitor and Regulate the industry. Their role

should be overarching to cover all players in the public and private sector. Their independence is

key.

Whereas the NOC is crucial, its establishment

must be clear in terms of nature, shareholding, directorship and citizenship participation. As the

business arm of the government, the History of

government doing business should be a good

guide. Shem Byakagaba - Public Dialogue on

Oil Bills

Recommendations cont’d..

Other Regulatory and oversight agencies like NEMA, URA, IGG, Auditor General, DPP and Police need to be strengthened in order to handle the complex issues arising from the petroleum industry

There should be deliberate interventions to build the capacity of the private sector, civil society and cultural institutions if local content, national participation and citizenship oversight is to be realized.


Recommendations contd…

The role of Local and regional governments needs to be highlighted.

The cultural institutions need to be taken care of even if it requires amending some of the existing legislations


Life and all its complexities leave us

scratching our heads at times. Thankfully,

others have been down the same path we

are now on, and have left us their wisdom

and advice. With their carefully crafted

words, they can lift us up, inspire us and

help us see that what we are experiencing

isn’t just unique to us, that others have

faced the same peaks and valleys and

conquered them.


Uganda can make this oil a

blessing.

YES WE CAN


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