Oil contracts in Uganda

Blog contributed by Lynn Turyatemba, a participant in next week’s contracts booksprint. Lynn is a lawyer by profession with a leaning towards social justice. She has for the last three years, while working with Africa Institute for Energy Governance (AFIEGO) as the Extractives Industries Governance Officer, worked closely with all stakeholders in the oil and gas industry especially in regard to creating awareness about the industry among the local communities in the Albertine Region, supporting the Parliamentary Forum on Oil & Gas with research information on the industry and participating in the advocacy work of the country’s Civil Society Coalition on Oil and Gas. As of September 2012, she has taken the responsibility as the Senior Programme Officer, Oil at the International Alert- Uganda office.

In late 2009, by way of Ugandan civil society vigilance and collaboration with international pressure groups, some Production Sharing Agreements that had been signed between the Government and the Heritage and Dominion oil companies leaked and on careful scrutiny, were found to be ‘bad’ for the citizens of Uganda. They, to use the words of the authors of the report, placed profit before people.

Since that time, Heritage Oil & Gas Company has left the country after selling her interests in the oil fields in Uganda’s Albertine region to Tullow Oil Plc. In fact, following this sale, to date, there is an unresolved dispute before a London court between the Government of Uganda and Heritage regarding capital gains tax that Heritage left the country without paying to the Revenue Authority.

The issue of oil contracts remains a contentious one in Uganda. Last year, the members of parliament of the country, during a special session of the House focusing on the oil and gas industry, demanded that the Executive lay before the Natural Resources committee of the Parliament, all existing contracts between the government and international oil companies. The demand culminated from allegations doing the rounds that some politicians had gained monetarily from the signing of the contracts, either through bribes or signature bonuses from the companies. The fact that the contents of the contracts remained a heavily guarded secret made such claims easy to make.

Early this year, despite a moratorium, placed by the parliament, on petroleum industry activities until proper legislation was put in place, the Executive went ahead to sign contracts with Tullow Oil Plc, TOTAL and CNNOC completing a farm-down process that had begun last year and claimed that these were not new contracts but only a continuation of already existing contracts.

It is a well-known fact that in many developing resource rich countries, contracts often literally take the character of laws binding the companies and the governments that sign these contracts with them. For that matter, these contracts are extremely important because once citizens know the contents of the contracts; they can hold their governments to account. Leakage of revenues can be stemmed and hopefully quality social service delivery can be realized.

The book on understanding oil and gas contracts that will be written during the upcoming book-sprint in Berlin convened by OpenOil is a significant first step in the effort to ensure that oil and gas contracts are negotiated with pro-people attitudes and that in the long run, economic benefit from the oil and gas industries across the developing world can truly be enjoyed by the citizens of these resource rich countries.

I am delighted that Uganda, through me, will be participating in this inaugural event and I am hopeful that the book will be a valuable tool to negotiators in the developing world as they seek to secure as much socio-economic benefit as possible for the citizens of their nations.

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