Keith Muhakanizi, Permanent Secretary Ministry of Finance

The Petroleum Fund currently has $ 72 million dollars and Shs 10bn on its Shillings account instead of the $709 that was collected

At least Shs 2 trillion oil revenues has already been spent on infrastructure and other energy projects, a report of the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) reveals.  However, the report adopted by parliament last week, does not give details of how and where the money was spent, but the Secretary to the Treasury in a letter, states the money was spent on the construction of Karuma hydro power plant.

One of the terms of reference for the Committee was to establish all revenues received in the Petroleum Fund. Accordingly, during the investigations, the Committee requested the Office of the Auditor General (AOG) to conduct a special audit to establish all revenues received by government in respect of the Petroleum Fund. After the audit, the report notes, it was discovered that so far, government received $709 million dollars in petroleum revenues between 2011 – March, 2017.

“The Committee established that a sum of $709 million dollars which has been ring fenced for infrastructure and energy development, accrued to the sector since petroleum activities started,” the report reads in part. However, as at 14th March, 2017, the Petroleum Fund had only $ 72.5 million dollars on its dollar account and a paltry Shs 10bn on its Shillings account.

“Out of this, $633.7 million dollars (approximately Shs 2.2 trillion) was transferred to the Consolidated Fund [and spent on Karuma hydro power project] while the sum of $72.3 million dollars is being held in dollar account and Shs 10bn Shillings account in the Petroleum Fund.

The Committee report reveals that by the time the Public Finance Management Act came into force in February, 2015, the oil revenue account in Bank of Uganda had a total of Shs 1.36 trillion, which was transferred to the consolidated fund.

In the report, MPs question, why Shs 1.36 trillion was transferred from the Oil Revenues Account in Bank of Uganda to the Consolidated Fund, instead of transferring it to the Petroleum Fund as required by the Public Finance and Accountability Act, 2015, as the fund’s opening balance.

However, in a letter dated June, 24^th, 2015, jointly signed by Mr Keith Muhakanizi the Secretary to the Treasury and Mr Lawrence Ssemakula the Accountant General, and seen by our writer, the duo directed the director in charge of Banking at Bank of Uganda to transfer the money, close the account and open a new account in the name of the Uganda Petroleum Fund.

“Prior to the enactment of the PFMA [Public Finance Management Act, 2015],  the oil funds on account were earmarked to support the financial year 2014/2015 budget for Karuma hydro power plant, and were released from the consolidated fund  and thus need to be refunded to the Uganda Consolidated Fund (UCF),” the duo wrote and further explained, “In order to operationalize the Petroleum Fund, there is need to open bank accounts for the Fund, where all oil revenues received by government from 6th March, 2015 shall be deposited. I authorize you to open a Uganda Shillings (UGX) and dollar (USD) accounts in the name of Uganda Petroleum Fund.”

According to the letter, the principal signatories to the Petroleum Fund are; Mr Keith Muhakanizi, Mr Patrick Ocailap (deputy Secretary to the Treasury), and Mr Lawrence Ssemakula, the Accountant General.

“The Committee recommends close monitoring and supervision of the activities of the petroleum authority and the Uganda National Oil company Limited. The relevant committees of parliament should receive quarterly reports from the Authority and National Oil Company,” the report recommends.

PRESIDENTIAL HANDSHAKE

In January, 2017, the Committee chaired by Hon. Abdul Katuntu (Bugweri MP) was tasked to investigate the controversial Shs 6bn reward to 42 government officials for winning a tax dispute between government of Uganda and Heritage Oil and Gas Limited an arbitration tribunal in Landon in 2015.

The gist of the investigation was to establish the legality of the Shs 6bn rewarded to 42 government officials for their effort in winning a tax arbitration case between government of Uganda and Heritage Oil and Gas Limited in Landon.

In 2010, Heritage Oil and Gas Company Limited sold its participating stake in the Albertine Graben to Tullow Uganda Limited at $ 1.45 billion – a transaction that attracted Capital Gains Tax. However, Heritage objected to tax assessments in the Tax Appeal Tribunal and also initiated arbitration proceedings in Landon against government of Uganda under the United Nations Commission for International Trade Law Arbitration Rules, 1976. The company sought a refund of all monies collected as Capital Gains Tax.

In February 2015, the tribunal dismissed Heritage’s application and awarded government of Uganda $ 4 million dollars in costs incurred in defending the application.  The committee established that government hired Curtis Mallet – Provost, Colt &Mosle LLP, a British law firm to represent government of Uganda in the arbitration proceedings at a cost of $8.6 million dollars.

Following the victory, the President acting on a request from senior government officials rewarded the 42 officials with Shs 6bn for their contribution.

The committee observes that the selection of the beneficiaries was not all inclusive. ‘For example, Bernard Sanya, the initiator of the tax two assessments was neither on the first list nor the second list of the beneficiaries. According to the report, there was a lot of informality and arbitrariness in the selection of beneficiaries.

“The committee concluded that the Shs 6n reward was contrary to standard practices of rewarding public officers, as provided for in the law. The President’s approval of the Shs 6bn was bonafide. However, it was an error of judgement,” the report reads.

The Committee recommended that all funds paid out of URA account to beneficiaries of the “handshake” should be refunded and all officers who flouted the law should be held accountable.

Responding to the report, Ali Sekatawa, Assistant Commissioner for Litigation, one of the beneficiaries of the handshake threatened to petition court over the report, arguing that the Committee selectively evaluated evidence before it, and thus came to wrong conclusions. He said parliament has no powers to order him to refund the money, since it was not given parliament. It came from URA’s account that had been appropriated by parliament. Parliament unanimously adopted the report.

UNCOLLECTED FUNDS

“The Committee further established that whereas the costs awarded to URA by the Tax Appeals Tribunal and the High Court of Uganda has not been taxed and recovered, up to approximately $ 15 million has not been recovered. The bill of costs is yet to be filed. The International Arbitration Tribunal in Landon did award Government of Uganda costs amounting to $4 million which also remains unrecovered,” the report reads in part.

The report asks the Attorney General to recover the $ 4million dollars as costs awarded by the arbitration tribunal within 90 days from the date of tabling the report. However, Ali Sekatawa says it will be difficult for government to recover the costs from Heritage Oil and Gas Limited, since the company was delisted from the Landon Stock Exchange.

Following the revelations by former Energy Minister, Syda Bbumba, that she signed the Production Sharing Agreements (PSAs) without reading through the agreements, the report recommends that politicians should be barred from signing such agreements.

“Parliament should revisit section 8 of the Petroleum (Exploration, Development and Production) Act, 2013 with a view of amending it and provide for technical people to be signatories to PSAs. All recoverable costs incurred by oil companies should be submitted to parliament quarterly,” he report reads.

Weighing in on the report, Odonga Otto (Aruu MP), said “The good thing we have a report adopted by parliament, so even if it takes 10 years, the beneficiaries of the handshake will refund that money” he said.

By Edward Ssekika

Oil.Uganda@actionaid.org

Residents of Bukuya gold mines that were arrested during the evictions receive legal assistance from a team of lawyers from Chapter Four and ActionAid Uganda.

Kawunde Patrick has been in the gold mining business for three years now. Previously he was a timber dealer and before that he traded in South Sudan until unrest broke out. On the fateful morning of the Mubende mines eviction, he watched in horror as his livelihood was swept right from under his feet.

The 35-year old father of five had a pit in the mines. On that fateful morning his boys were already in the pit working when he was ordered by angry soldiers to get them out and ensure no one stayed down. The miners had been given two hours – though most swear it was hardly an hour – to vacate the mines. Pandemonium reigned as over 50,000 people gathered whatever they could to flee.

Preoccupied with getting his boys out of the pit Kawunde had no time to pick anything from his house. By the time he got there the padlock was broken, his house ransacked.

“Soldiers stopped me from taking anything. I lost three generators; three blowers that supply oxygen down the pit and four drilling machines,” Kawunde painfully narrated his ordeal.

He valued the generators at Shs3million each; two blowers at Shs2.2million each and a smaller one at Shs700,000. The drillers together cost Shs4.4million.

“I watched as Sh16million of my capital was snatched out of my hands,” he said resignedly with tears welling up in his eyes. A week later he found out his Sh9million ball mill had been taken too.

“In my lifetime I have never seen anything like this,” he said in a distant voice.”

Mr Kawunde is just one of many artisanal miners that lost property and money during the eviction.

Mr Kawunde, a gold miner who lost mining equipment worth millions of money

“People left money in their houses as they fled,” said another miner who identified himself as just Alex. Alex was one of so many business people who fled off the gold value chain. He owned a lodge and bar. He had just spent Shs6million on iron sheets to construct more makeshift rooms. Like many others he left his iron sheets in the mines.

“If I had not bought those sheets I would at least have something to start with. I left everything of mine in the mines. I have not changed clothes since we were evicted,” he said.

Another miner of Rwandese origin had his Toyota Premio confiscated by police when he was asked to produce his national ID which he had misplaced in the fracas.

Led by Ntare Sipriano, the LCI chairman Lujinji B, an angry group of miners still camped in the trading center just outside the mines said the military men told them they had orders to take over the place and confiscate everything.

“A few lucky ones had managed to get out some property before the place was put on lockdown,” said one of them.

To the ordinary eye artisanal gold miners spend day in and out torturously excavating stone and go through strenuous means to extract gold from the ore. Yet in fact the clueless miners are counting losses since their eviction early this month. Clueless because every government stakeholder they believed had given them assurance of their continued operations right from the fountain of honour has betrayed them.

Mr Bukenya Michael, the Bukuya constituency MP, said they had ‘done everything possible’ to stop the evictions, lobbying in higher offices but were powerless to stop anything.

In his State of the Nation address of 2015 President Museveni assured the miners in Mubende their plight would be addressed. For five years now the miners have waited for a location license in vein. This year, with the eviction looming, negotiations were ongoing as politicians shuffled between State House and Mubende.

Mr Emmanuel Kibirige, the secretary Singo Artisanal and Small Scale Miners Association said Benny Namugwanya, the Woman MP Mubende, was supposed to have given them feedback from a consultation meeting she had attended in Kampala over their plight. Other than what had transpired they were expressly evicted albeit earlier directives to vacate that they mostly took casually.

“We have lost our lives and livelihood. Our government has done it again to further marginalize the poor. Thanks NRM. Our property worth millions is in the hands of soldiers. Only two hours to shit items after working for ten years,” Kibirige says bitterly.

Kibirige wondered what would become of people’s property as there wasn’t any sort of documentation taking place.

“I have an acre of land I bought in that place and have a land sale agreement for it. What has it got to do with the mines? We would not have refused to leave the mines but should have let us take our property,” Kibirige, who sustained a broken leg in the fracas, says.

After years of toiling several of the miners own pits. Inclusive of paying rental fees to landlords, hiring generators and drilling tools, and labour, operating a pit cost up to Sh500,000 daily, according to Ivan Kawuma, another miner. Kawuma owned a pit more than 300 feet deep after working for more than five years.

What has however left several people baffled is their machinery that they were using in their operations. People were not allowed to take their machinery. Miners have also reported seeing a military police truck driving out of the miners with generators, blowers, and other equipment like drillers.

When asked about people losing property Mr Byaruhanga Patrick, the district police commander Mubende, said those were exhibits to adduce as evidence of illegal mining otherwise people had managed to carry out all their other belongings.

For now the miners are waiting and hoping that they will be allowed back to operate or at least seize opportunities if an investor starts operations.

By Robert Mwesigye and photos by Josephine Nabaale

Oil.Uganda@actionaid.org

Mr Shaban Kinobe. LC3 chairman Panyimur Sub County reading a copy of oil in uganda magazine.This was during a meeting with ActionAid Uganda.
Photo by Josephine Nabaale

Got Apwoyo sub county is headquartered somewhere inside a tiny structure in Nwoya district, tucked behind the Gulu – Pakwach highway. Turning off at a trading centre is a small road that leads to the quiet two-roomed establishment.

The trading centre, a product of one of the several Internally Displaced Camps during the wanted warlord, Joseph Kony’s Lord’s Resistance Army insurgency in northern Uganda, is littered with grass thatched structures.

The area is fairly cool, it’s the rainy season. Endless tracts of green vegetation are visible are along the highway. Expansive gardens of cereal are visible too. In the background of the sub county office is expansive maize garden. It looks healthy.

The region, having not been cultivated for a long time during the insurgency, has very fertile soils. In fact there are agro-based companies cultivating on very large scale. But beneath the agricultural potential here, lie simmering emotions and a sense of hopelessness.

Mr Openy Ben Latim, the LC3 chairperson Got Apwoyo sub county, is a very bitter man. Nwoya district lies in the Albertine region which harbours Uganda’s oil fields. Across the highway is the Murchison Falls National Park where Total E&P won production licences for oil and gas in the Exploration Area (EA1).

Despite the proximity, Mr Openy is not optimistic at all and says the people are not happy. During the initial oil exploration in the park while prospecting for hydro carbons, locals and leaders did not know what was going on.

“I don’t think we are going to benefit anything. Youth would come from Kampala to work here when we have our own. They used to bring everything from Kampala. Trucks used to bring vegetables for those people yet here we can grow vegetables,” Openy says in a bitter tone.

The explanation that Nwoya district is part of government’s master plan for the oil sector – the standard gauge railway poised to run through the district, a network of roads in the park, feeder pipelines linking to the Central Processing Facility in Buliisa – does not offer any comfort.

In fact, the mention of Buliisa irks him the more. “You see, everything happens in Nwoya but ends up in Buliisa,” he says.

A story is told of how a group of locals once intercepted a truck that was leaving the park because they believed it was carrying crude oil. The truck was one of several that delivered suppliers then to the camps in the park during the exploration.

At Anaka Sub County not far from Nwoya district headquarters, the sentiments are not any different.  Mr Opobo Geoffrey, the LC3 chairperson, said it was absurd that oil companies could not give their people simple jobs like security guards or drivers.

“We do have those certified drivers here but they cannot get jobs there,” he said when asked if some of the locals were certified drivers.

“We do not know anything that is going on there in the park. The only thing we know about Total is the scholarships some of our youth get. I so far have four students benefiting, but that is it,” he said.

The now Pakwach was curved off Nebbi district. Mr Okumu Benson is the LC3 chairperson Pakwach Town Council. He too adds his voice saying they do not have information about the oil activities in the district.

In the compound of the town council offices stands a Total – that now has a production licence for EA1 in Murchison Falls – branded notice board. Also a Total branded ‘suggestion box’ is pinned on the main administration block. Mr Okumu says the oil company occasionally pins up general information about developments in the sector but locals interpret it otherwise.

“They usually find their way to the camps and claim they advertised jobs. We wonder where they get that information but it’s because people are desperate. Sometimes they accuse us of hiding oil jobs from them,” Okumu says.

Mr Aguta Jimmy Frank, the Pakwach town clerk, says because of lack of information has misled people. During the exploration stage there was a wide spread problem of land speculation in the Albertine region because of oil.

“People here sold their land at giveaway prices to speculators. Our people were taken advantage of and now they blame the government,” Mr Aguta says.  Expectations remain high now that production phase is upon the country. Chairman Okum says they were told at a workshop in Kampala that 13,000 jobs would be created for Ugandans. But there is a catch.

Not all about oil

“This is the time to seize opportunities in the oil sector,” Paul Tumwebaze of Civil Society Coalition on Oil and Gas once told a youth workshop in Masindi.  This is a statement that has countless times resonated at numerous oil and gas workshops, the media and conferences under the flagship of ‘local content’.

Whereas several Ugandans have pinned hopes on oil since prospecting started industry stakeholders advise about the immense opportunities available to feed off the value chain of the sector.

While meeting local government leaders, all of whom have been mentioned above, Didas Muhumuza, the ActionAid Extractives Governance project manager, who has immense knowledge of the sector as well, passed on the same message.

Specifically rallying for the inclusion of youth in accountable governance of the oil and gas sector, he reiterated that the industry will not absorb every Ugandan looking to join the sector.

“The decisions government is taking now as we enter the production phase were informed from what has been gathered since exploration started. There is nothing we can change now, but can work within the existing infrastructure,” Muhumuza told the meeting at Got Apwoyo Sub County.

Chairman Openy had endlessly lamented that Nwoya was being sidelined, wondering why the oil pipeline network that will be draining in the Central Processing Facility should be located in Buliisa. Mr Muhumuza was at pains to explain that because Murchison Falls is a protected area much of the activity could not take place there.

While many of the leaders lamented their youth were not equipped to position themselves for opportunities through skilling and training, there are organisations like the GIZ-funded Skilling Uganda that are offering these opportunities. The programme is targeting to skill 8,000 youth in welding, driving, carpentry, electrical which will be on high demand during the production phase.

ActionAid Uganda under the Extractives Governance is rolling out a two-year Ford Foundation supported intervention to sensitise youth and build their capacity to gain an understanding of the extractives sector and use their knowledge to engage state and corporate actors in the accountable management of the sector. The project focuses on four Albertine districts of Hoima, Buliisa, Nwoya, Nebbi; and Mubende district.

Fortunately some of the leaders are not hopelessly waiting for the magic bullet. Mr Shaban Kinobe. LC3 chairman Panyimur Sub County said everyone is looking at oil whereas opportunities are abound in the value chain. Many of the leaders however expressed optimism about the new project, “People in Power; Influencing People in Power.

Robert Mwesigye

Oil.Uganda”actionaid.org

Mr Edwards Katto, Director, Directorate of Geological Survey and Mines Uganda.

He describes artisanal miners as “a menace” to the mining sector

Edward Ssekika

In a new twist that arguably contradicts government rhetoric on Artisanal and Small Scale Miners (ASMs) in the country, the Director, Directorate of Geological Survey and Mines (DGSM) in the Ministry of Energy and Mineral Development, Edwards Kato, has ordered all illegal artisanal miners to vacate the respective mines.

“Those people [artisanal miners], still joking should style up. Now, I’m not only a director [in the ministry] but also a commander of the Minerals Protection Unit of the Uganda Police Force. So, those illegal artisanal miners still behaving like those in Mubende [who were evicted], they should pack and vacate the mines, otherwise, my police force will them help to pack,” Mr Kato said.

With the Mineral Police, he emphasized the “madness” of artisanal miners will stop. Kato praised the “Chunga Mazingira Operation”, sanctioned by President Yoweri Museveni in which more than 60,000 artisanal gold miners in Bukuya and Kitumbi sub counties in Mubende district were evicted to pave way for an investor to develop the mines.

The eviction left many artisanal gold miners counting loses without any source of livelihood. The artisanal miners have since sued Attorney General [Government] seeking compensation for their property destroyed during the brutal eviction jointly carried out by the army and police.

On August 7th, this year, the Inspector General of Police (IGP), created a unit known as Mineral’s Protection Police, within the police force. Headed by Ms. Keigomba Jesca, the Unit is charged with implementing policies, plans and strategies for effective security of minerals in the country. The unit was formed days after the army and police evicted artisanal miners in Mubende district. Minerals have a direct impact on revenue, immigration, law and order as well as environmental management.

“Artisanal miners have been a big thorn in the mineral’s sector. They are a total menace,” Mr Kato said.

Kato was on Wednesday 4^th, October this year speaking at the 6^thAnnual Mineral Wealth Conference at Kampala Serena Hotel. Running under the theme “Minerals: Knocking on the door to cause economic transformation in Uganda,” the conference is organized by the Uganda Chamber of Mines and Petroleum in collaboration with the Ministry of Energy and Minerals Development.

According to a report titled, “Understanding Artisanal and Small Scale Mining (ASM) Operations in Uganda,” by African Center for Energy Policy (ACEMP), 2016, there are more than 250,000 Artisanal and Small Scale Miners in Uganda. Eviction of these miners will exacerbate unemployment and impoverishment, especially among the youth and women who work in the mines.

Though most artisanal miners do their work without any license, which is illegal, evicting them from the mines is not a solution. They instead need to be helped to formalize their operations and licensed.  Under section 4(1) of the Mining Act, to prospect, explore, mine, retain or dispose of any mineral without a license, any person mining without a license, upon conviction is liable to a pay fine of Shs 500,000= shillings or imprisonment not exceeding one year. In case of a company, the fine is not exceeding Shs 1 million.

However, in a tongue-in-cheek presentation, Mr Kato pledged to organize artisanal miners. “We need to regulate and formalize Artisanal and Small Scale Mines (ASMs), they have become a menace all over. Government shall organize and license artisanal miners and transform their activities into formidable and viable business entities,” he said contradicting himself.

Artisanal Miners have formed associations in a bid to formalize their mining activities. However, government has been reluctant to recognize these associations. For instance, artisanal gold miners in Mubende formed and registered Ssingo Artisanal and Small Scale Miners Association. The association applied for exploration licenses. The Directorate of Geological Survey and Mines (DGSM) didn’t decline to grant artisanal miners a license, but did not even give them feedback. Failure to give feedback contravenes Mining Act, 2003.

“We shall ensure that artisanal mining is a preserve for Uganda citizens and encourage joint ventures for small scale mining operations,” he said.

In a clear contrast and manifestation of lack of coordination, Mr. Alain Goetz, the Chief Executive Officer (CEO) of African Gold Refinery (AGR), seemed to praise artisanal miners for their constant supply of gold to the refinery. He said his company will work closely with artisanal mining communities in Mubende to ensure that artisanal miners maximize their returns, perhaps not aware that they were evicted from the mines.

A CASE FOR KARAMOJA EXPLORATION

Dr Elly Karuhanga, the chairman Uganda Chamber of Mines and Petroleum (UCMP) asked government to earmark $ 20 million dollars for the geophysical Aerial survey of Karamoja. The area was left out due to insecurity then. “Why can’t we as a country mobilize $ 20 million dollars (approximately Shs 70 billion) and explore Karamoja, a basket for our mineral” Hon. Karuhanga said. Geophysical Aerial survey help to determine the minerals available in an area.

On her part, Speaker of Parliament, Rebecca Kadaga pledged to “harass” the Ministry of Finance, Planning and Economic Development to find the money to finance geophysical Aerial survey for Karamoja.  “We can’t find $ 20 million dollars? Really, I think this is lack of focus and commitment towards the mining sector,” Kadaga said.

By Edward Ssekika

Oil.Uganda@actionaid.org

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

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.

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

Keith Muhakanizi, Permanent Secretary Ministry of Finance

The Petroleum Fund currently has $ 72 million dollars and Shs 10bn on its Shillings account instead of the $709 that was collected

At least Shs 2 trillion oil revenues has already been spent on infrastructure and other energy projects, a report of the Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) reveals.  However, the report adopted by parliament last week, does not give details of how and where the money was spent, but the Secretary to the Treasury in a letter, states the money was spent on the construction of Karuma hydro power plant.

One of the terms of reference for the Committee was to establish all revenues received in the Petroleum Fund. Accordingly, during the investigations, the Committee requested the Office of the Auditor General (AOG) to conduct a special audit to establish all revenues received by government in respect of the Petroleum Fund. After the audit, the report notes, it was discovered that so far, government received $709 million dollars in petroleum revenues between 2011 – March, 2017.

“The Committee established that a sum of $709 million dollars which has been ring fenced for infrastructure and energy development, accrued to the sector since petroleum activities started,” the report reads in part. However, as at 14th March, 2017, the Petroleum Fund had only $ 72.5 million dollars on its dollar account and a paltry Shs 10bn on its Shillings account.

“Out of this, $633.7 million dollars (approximately Shs 2.2 trillion) was transferred to the Consolidated Fund [and spent on Karuma hydro power project] while the sum of $72.3 million dollars is being held in dollar account and Shs 10bn Shillings account in the Petroleum Fund.

The Committee report reveals that by the time the Public Finance Management Act came into force in February, 2015, the oil revenue account in Bank of Uganda had a total of Shs 1.36 trillion, which was transferred to the consolidated fund.

In the report, MPs question, why Shs 1.36 trillion was transferred from the Oil Revenues Account in Bank of Uganda to the Consolidated Fund, instead of transferring it to the Petroleum Fund as required by the Public Finance and Accountability Act, 2015, as the fund’s opening balance.

However, in a letter dated June, 24^th, 2015, jointly signed by Mr Keith Muhakanizi the Secretary to the Treasury and Mr Lawrence Ssemakula the Accountant General, and seen by our writer, the duo directed the director in charge of Banking at Bank of Uganda to transfer the money, close the account and open a new account in the name of the Uganda Petroleum Fund.

“Prior to the enactment of the PFMA [Public Finance Management Act, 2015],  the oil funds on account were earmarked to support the financial year 2014/2015 budget for Karuma hydro power plant, and were released from the consolidated fund  and thus need to be refunded to the Uganda Consolidated Fund (UCF),” the duo wrote and further explained, “In order to operationalize the Petroleum Fund, there is need to open bank accounts for the Fund, where all oil revenues received by government from 6th March, 2015 shall be deposited. I authorize you to open a Uganda Shillings (UGX) and dollar (USD) accounts in the name of Uganda Petroleum Fund.”

According to the letter, the principal signatories to the Petroleum Fund are; Mr Keith Muhakanizi, Mr Patrick Ocailap (deputy Secretary to the Treasury), and Mr Lawrence Ssemakula, the Accountant General.

“The Committee recommends close monitoring and supervision of the activities of the petroleum authority and the Uganda National Oil company Limited. The relevant committees of parliament should receive quarterly reports from the Authority and National Oil Company,” the report recommends.

PRESIDENTIAL HANDSHAKE

In January, 2017, the Committee chaired by Hon. Abdul Katuntu (Bugweri MP) was tasked to investigate the controversial Shs 6bn reward to 42 government officials for winning a tax dispute between government of Uganda and Heritage Oil and Gas Limited an arbitration tribunal in Landon in 2015.

The gist of the investigation was to establish the legality of the Shs 6bn rewarded to 42 government officials for their effort in winning a tax arbitration case between government of Uganda and Heritage Oil and Gas Limited in Landon.

In 2010, Heritage Oil and Gas Company Limited sold its participating stake in the Albertine Graben to Tullow Uganda Limited at $ 1.45 billion – a transaction that attracted Capital Gains Tax. However, Heritage objected to tax assessments in the Tax Appeal Tribunal and also initiated arbitration proceedings in Landon against government of Uganda under the United Nations Commission for International Trade Law Arbitration Rules, 1976. The company sought a refund of all monies collected as Capital Gains Tax.

In February 2015, the tribunal dismissed Heritage’s application and awarded government of Uganda $ 4 million dollars in costs incurred in defending the application.  The committee established that government hired Curtis Mallet – Provost, Colt &Mosle LLP, a British law firm to represent government of Uganda in the arbitration proceedings at a cost of $8.6 million dollars.

Following the victory, the President acting on a request from senior government officials rewarded the 42 officials with Shs 6bn for their contribution.

The committee observes that the selection of the beneficiaries was not all inclusive. ‘For example, Bernard Sanya, the initiator of the tax two assessments was neither on the first list nor the second list of the beneficiaries. According to the report, there was a lot of informality and arbitrariness in the selection of beneficiaries.

“The committee concluded that the Shs 6n reward was contrary to standard practices of rewarding public officers, as provided for in the law. The President’s approval of the Shs 6bn was bonafide. However, it was an error of judgement,” the report reads.

The Committee recommended that all funds paid out of URA account to beneficiaries of the “handshake” should be refunded and all officers who flouted the law should be held accountable.

Responding to the report, Ali Sekatawa, Assistant Commissioner for Litigation, one of the beneficiaries of the handshake threatened to petition court over the report, arguing that the Committee selectively evaluated evidence before it, and thus came to wrong conclusions. He said parliament has no powers to order him to refund the money, since it was not given parliament. It came from URA’s account that had been appropriated by parliament. Parliament unanimously adopted the report.

UNCOLLECTED FUNDS

“The Committee further established that whereas the costs awarded to URA by the Tax Appeals Tribunal and the High Court of Uganda has not been taxed and recovered, up to approximately $ 15 million has not been recovered. The bill of costs is yet to be filed. The International Arbitration Tribunal in Landon did award Government of Uganda costs amounting to $4 million which also remains unrecovered,” the report reads in part.

The report asks the Attorney General to recover the $ 4million dollars as costs awarded by the arbitration tribunal within 90 days from the date of tabling the report. However, Ali Sekatawa says it will be difficult for government to recover the costs from Heritage Oil and Gas Limited, since the company was delisted from the Landon Stock Exchange.

Following the revelations by former Energy Minister, Syda Bbumba, that she signed the Production Sharing Agreements (PSAs) without reading through the agreements, the report recommends that politicians should be barred from signing such agreements.

“Parliament should revisit section 8 of the Petroleum (Exploration, Development and Production) Act, 2013 with a view of amending it and provide for technical people to be signatories to PSAs. All recoverable costs incurred by oil companies should be submitted to parliament quarterly,” he report reads.

Weighing in on the report, Odonga Otto (Aruu MP), said “The good thing we have a report adopted by parliament, so even if it takes 10 years, the beneficiaries of the handshake will refund that money” he said.

By Edward Ssekika

Oil.Uganda@actionaid.org

Residents of Bukuya gold mines that were arrested during the evictions receive legal assistance from a team of lawyers from Chapter Four and ActionAid Uganda.

Kawunde Patrick has been in the gold mining business for three years now. Previously he was a timber dealer and before that he traded in South Sudan until unrest broke out. On the fateful morning of the Mubende mines eviction, he watched in horror as his livelihood was swept right from under his feet.

The 35-year old father of five had a pit in the mines. On that fateful morning his boys were already in the pit working when he was ordered by angry soldiers to get them out and ensure no one stayed down. The miners had been given two hours – though most swear it was hardly an hour – to vacate the mines. Pandemonium reigned as over 50,000 people gathered whatever they could to flee.

Preoccupied with getting his boys out of the pit Kawunde had no time to pick anything from his house. By the time he got there the padlock was broken, his house ransacked.

“Soldiers stopped me from taking anything. I lost three generators; three blowers that supply oxygen down the pit and four drilling machines,” Kawunde painfully narrated his ordeal.

He valued the generators at Shs3million each; two blowers at Shs2.2million each and a smaller one at Shs700,000. The drillers together cost Shs4.4million.

“I watched as Sh16million of my capital was snatched out of my hands,” he said resignedly with tears welling up in his eyes. A week later he found out his Sh9million ball mill had been taken too.

“In my lifetime I have never seen anything like this,” he said in a distant voice.”

Mr Kawunde is just one of many artisanal miners that lost property and money during the eviction.

Mr Kawunde, a gold miner who lost mining equipment worth millions of money

“People left money in their houses as they fled,” said another miner who identified himself as just Alex. Alex was one of so many business people who fled off the gold value chain. He owned a lodge and bar. He had just spent Shs6million on iron sheets to construct more makeshift rooms. Like many others he left his iron sheets in the mines.

“If I had not bought those sheets I would at least have something to start with. I left everything of mine in the mines. I have not changed clothes since we were evicted,” he said.

Another miner of Rwandese origin had his Toyota Premio confiscated by police when he was asked to produce his national ID which he had misplaced in the fracas.

Led by Ntare Sipriano, the LCI chairman Lujinji B, an angry group of miners still camped in the trading center just outside the mines said the military men told them they had orders to take over the place and confiscate everything.

“A few lucky ones had managed to get out some property before the place was put on lockdown,” said one of them.

To the ordinary eye artisanal gold miners spend day in and out torturously excavating stone and go through strenuous means to extract gold from the ore. Yet in fact the clueless miners are counting losses since their eviction early this month. Clueless because every government stakeholder they believed had given them assurance of their continued operations right from the fountain of honour has betrayed them.

Mr Bukenya Michael, the Bukuya constituency MP, said they had ‘done everything possible’ to stop the evictions, lobbying in higher offices but were powerless to stop anything.

In his State of the Nation address of 2015 President Museveni assured the miners in Mubende their plight would be addressed. For five years now the miners have waited for a location license in vein. This year, with the eviction looming, negotiations were ongoing as politicians shuffled between State House and Mubende.

Mr Emmanuel Kibirige, the secretary Singo Artisanal and Small Scale Miners Association said Benny Namugwanya, the Woman MP Mubende, was supposed to have given them feedback from a consultation meeting she had attended in Kampala over their plight. Other than what had transpired they were expressly evicted albeit earlier directives to vacate that they mostly took casually.

“We have lost our lives and livelihood. Our government has done it again to further marginalize the poor. Thanks NRM. Our property worth millions is in the hands of soldiers. Only two hours to shit items after working for ten years,” Kibirige says bitterly.

Kibirige wondered what would become of people’s property as there wasn’t any sort of documentation taking place.

“I have an acre of land I bought in that place and have a land sale agreement for it. What has it got to do with the mines? We would not have refused to leave the mines but should have let us take our property,” Kibirige, who sustained a broken leg in the fracas, says.

After years of toiling several of the miners own pits. Inclusive of paying rental fees to landlords, hiring generators and drilling tools, and labour, operating a pit cost up to Sh500,000 daily, according to Ivan Kawuma, another miner. Kawuma owned a pit more than 300 feet deep after working for more than five years.

What has however left several people baffled is their machinery that they were using in their operations. People were not allowed to take their machinery. Miners have also reported seeing a military police truck driving out of the miners with generators, blowers, and other equipment like drillers.

When asked about people losing property Mr Byaruhanga Patrick, the district police commander Mubende, said those were exhibits to adduce as evidence of illegal mining otherwise people had managed to carry out all their other belongings.

For now the miners are waiting and hoping that they will be allowed back to operate or at least seize opportunities if an investor starts operations.

By Robert Mwesigye and photos by Josephine Nabaale

Oil.Uganda@actionaid.org