Include MPs in Uganda oil deals

The Government of Uganda has signed Production Sharing Agreements (PSAs) with Tullow Oil plc for EA1 and Kanywataba areas and a production licence has been awarded for Kingfisher discovery area.

Parliament has been ignored and this has become the main focus of MPs and public concern. In a country where one man rule is the norm, this should not surprise anyone.

The issue is therefore how to handle the fait accompli as abrogating the agreements is unrealistic.

Parliament and the public should no doubt protest. But unfortunately whenever such things happen, the perks of MPs also usually crop up as an issue, thus undermining Parliament’s ability to act effectively and as a united institution.

Thus side by side with the PSAs signing, the public is confronted with the distracting issue of MPs’ vehicles scheme. Not much information about the vehicle scheme has been released to the public, but what is available is enough to raise public concern in view of the bad economic conditions in the country.

That both issues have turned up at the same time may be a coincidence but the timing also happens to be fortunate for government.
To return to the signed PSAs, what should MPs look for? It is important, for example, to be sure with which company the government has entered into agreements with.

There is need to know how much the signature bonuses are and whether they have been paid to government.

There is need to know what the cost recovery clauses provide. Are the provisions relating to taxation and production sharing improvements over the previous PSAs?

Do the PSAs provide for equity participation by government, which would give government a greater proportion of revenue? The previous ones provided for 15 per cent and 20 per cent without providing upfront funding.

Has government taken up its option of shares when it issued a production licence for Kingfisher discovery area, as provided for in the PSA? If not, why? What do the clauses on resolution of conflicts provide? arbitration experience has improved.

What about the stabilisation clauses which freeze Ugandan law and tie government and Parliament hands so that no laws improving environmental and human rights protection or making changes on taxation can be passed and affect the contacting companies? How do the new PSAs address the issues of transparency?

Are there confidential clauses and what do they relate to and why? Will the companies produce reports on payments to government and available to the public?

Why should there be concern raised in the questions above? Ideally, the laws, regulations, institutions and transparency measures should be in place early enough before the licensing of oil companies and before production in order to avoid the corrosive and corruption effects of oil booms seen elsewhere in Africa.

Secondly, the country needs to be able to control the pace of the development of the oil sector so that commercial interests do not come first before the interests of the country.

Since there will be a short time frame for oil production, 20 to 30 years, it is important that revenues from oil are used wisely from the beginning and that investments are sustainable once the oil runs out.