Oil In Uganda » Economy

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

Artisan Miners evicted and displaced by Uganda Millitary.

As plans to properly harness the mineral resource potential by government takes shape, the Ministry of Energy and Mineral Development will launch the Biometric Registration and Management of the ASM segment in Uganda Project (BRASM), on Friday 29th March 2019, in Kampala.
The move is the commencement of an arduous process by government efforts to formalize the artisanal and small scale mining (ASM) sub-sector, which constitutes 90% of the mining activity in Uganda and is a source of livelihood for many people.
Formalization and regulation of the ASM sub-sector is part of Government’s broader strategy of ensuring that mining as a whole becomes one of the key economic drivers of the Ugandan economy as envisaged by the country’s Vision 2040 and National Development Plan II (2015/16 – 2020/21).
Much as the development is part of Uganda’s commitment and recognition of international and regional initiatives such as Africa Mining Vision (2009), the International Conference on the Great Lakes Region (ICGLR) 1, ASM Formalization Guide in the Great Lakes Region and the IGF Guidance for Governments on managing the ASM sub-sector, it comes as a huge boost for the local miners who remain uncertain about their plight in the ever metamorphosing mining sector and mineral development overall.
ASM activities had for long been regarded illegal in Uganda though the sub-sector continued to attract many people in pursuit of survival, an aspect that has drawn attention owing to its social inclusivity and potential to improve the livelihoods of many people in impoverished nations.
This is evidenced in a policy brief by Africa Centre for Energy and Mineral Policy that will undertake the BRASM project (on behalf of the Directorate of Geological Surveys and Mines), which linked ASM to the Sustainable Development Goals which form part of Uganda’s development agenda.
“On a global level, Uganda embraced the 2030 Agenda for Sustainable Development to foster social inclusion, environmental sustainability and economic development through the Sustainable Development Goals (SDGs) and has made strong efforts to domesticate the SDGs to achieve its targeted development outcomes. Mining is one of those sectors that can contribute to Uganda’s development targets given that ASM directly relates to many of the SDGs,” the brief states.
Whatever promise the ASM sub-sector held for transforming people’s lives however was thrown to the wind (especially in Mubende now Kassanda district), when artisanal and small scale gold miners were ruthlessly evicted from the mines in August 2017, where over 60,000 people etched a living. The shocking development was widely condemned by Civil Society among other stakeholders. The President of Uganda however argued that unlike other gold mining areas such as the eastern district of Busia which he cited, the Mubende mines posed a security threat as the people working there were not known thus being foreigners. He said the move was necessary to organize them first and know who they are and duly register them.
Organising the sub-sector henceforth became a priority of the MEMD as government was urged to fast track the process of amending the mining laws in search of a solution for the miners and avoid such drastic measures like evictions in future.
Consequently the process of registration is a precursor to the integration of ASM activities and operations into the broader mining legal and regulatory framework as well as integration of informal ASM activities into the formal fiscal and economic system. This is envisaged to reduce or eliminate the social and environmental negative impacts and externalities of ASM operations, streamline ASM operations alongside medium to large scale mining operations and concessions and capture lost economic value of the sector for the sustainable development of the Ugandan economy.
The MEMD therefore is partnering with ActionAid International Uganda to officially launch (as shared above) the biometric registration initiative to enable stakeholders appreciate and how it works and the value it will create to especially ASMs going forward.
By Robert Mwesigye
Edited by Flavia Nalubega
Edited by Didas Muhumuza
Oil.Uganda@actionaid.org

The Oil-rich Uganda is set to join the Extractive Industries Transparency Initiative (EITI), an independent, internationally agreed upon, voluntary standard for creating transparency within the extractives sector. Ever since Ugandan discovered commercially oil reserves in 2006, civil society actors started a campaign to convince the Ugandan government to join EITI.

The campaign registered headway when Parliament in 2008 passed the National oil and gas policy that among others asked Government to join EITI. The policy states that joining EITI would help “ensure collection of the right revenues and use them to create lasting value for the entire nation,”

As Uganda made little progress in joining EITI, the Western Uganda Youth MP Gerald Karuhanga who is presently the Ntungamo Municipality lawmaker presented to parliament documents which he alleged implicated Uganda’s foreign affairs Minister Mr Sam Kutesa, internal affairs minister Hilary Onek, and Mr Amama Mbabazi, the then Uganda’s prime minister in receiving millions of dollars from Tullow Oil.

He alleged that between June 1st and July 16th, 2010, Tullow paid up to $100 million to “expert” bureaucrats, among them the three ministers. Tullow Oil denied the allegations. Parliament instituted an adhoc committee to investigate the matter and after two years of investigation, the committee did not find any evidence to confirm any wrongdoing by Tullow Oil and the Ministers.

In a stormy parliament session when the oil bribery allegations were discussed in parliament in October of 2011, Parliament passed a resolution re-affirming Uganda’s need to join EITI.

The European Union delegation to Uganda has been urging Uganda to join EITI, a source at the EU told oil in Uganda.

“We have been having discussions with the Ugandan government to embrace EITI. We are pleased that Uganda has embraced the initiative. We wait to see how it will be implemented” a diplomatic source said before referring this author to the EU website that has a short statement about EU’s stand on EITI.

The decision taken by Uganda’s Cabinet on January 28 and publicly announced by the Government of Uganda on January 29, is a very positive step towards improved public financial management and accountability of natural resources, said the EU statement dated January 30, 2019.

“The EITI is the global standard to promote the open and accountable management of oil, gas and mineral resources, and Uganda’s decision to become a fully-fledged member state is an important step for improved accountability particularly as the country continues to prepare for oil production,” said EU Ambassador Attilio Pacifici.

Through persistent policy dialogue, the European Union and its Members States, as well as other leading development partners, have encouraged Uganda’s formal accession to the EITI to address key governance issues of the oil, gas and mining sectors, including transparency and accountability.

“This is a very positive step towards improved financial management and accountability of natural resources,” Attilio added.

EITI was launched in June of 2003 as a way to tackle corruption within those industries that engage in the commercial development of oil, natural gas, and minerals.

When a country joins EITI, it agrees to publicly disclose the money and other benefits it receives from the extractive companies that operate within its borders. EITI does this by having independent auditors publicly reconcile company payments with government receipts.

“Ideally, such transparency helps empower all major stakeholders, including civil society, to hold governments and oil companies accountable for the management of those resources” says a report that was released by the Advocates coalition for Development an Environment (ACODE), a Ugandan Think Tank.

The report titled, Extractive Industries Transparency Initiative (EITI), a necessity for Uganda was authored by Ms Winfred Ngabiirwe, the Executive Director, Global Rights Alert (GRA), Executive Director and Publish What You Pay Uganda Chapter and Ms Elizabeth P. Allen, who was a research Associate at ACODE.

The research stated that EITI can help reduce secrecy and mistrust between governments, citizens, and oil companies.

“In many oil-producing countries, secrecy in the extractive sector has heightened suspicion among citizens who assume that such secrecy exists to hide corruption on the part of government officials and/or oil companies. EITI can help create forums for dialogue, understanding, and resolution that illuminate the sector for all players involved” the study said.

EITI can also help create an improved investment climate for those countries that participate. Credible investors and international financial institutions find it pleasing to invest in governments that have embraced EITI since they are assured of transparency.

EITI helps the public in understanding how much their country receives from extractive industries and the contribution of minerals in the economic welfare of the citzens.

In a country where corruption is rampant, says Mr Biira Nasser Kiwanuka, the Executive Director of the Mid-Western Regional Anti -Corruption a Coalition (MIRAC), EITI acts as a watch dog for the public to expose incomes, expenditures and leakages of revenues from oil and other minerals.

Edward Ssekika & Francis Mugerwa

youth-ent-workshop Participants at a youth entrepreneurial and innovations “clinic” in Gulu organized by ActionAid Uganda and partners have been urged to look beyond the petty politics being peddled about the oil and gas sector and instead channel their energies on positioning themselves to benefit from it.

The call was made following emotional outbursts by some participants who raised concerns about the perceived discrimination against the region by locating crucial oil infrastructure outside their region. They also argued that youth from the region were not benefiting from skilling and training opportunities being offered by oil companies (and the government).

“If you are to benefit from this sector you must think about yourself and how you are going to gain out of it. The oil sector is global and the politics will always be there. What will you do about it? We are not the first to have oil and will not be the last. Are you going to move the airport from Kabaale (in Hoima) to Nwoya?” Paul Twebaze stung the participants.

He added: “These decisions are informed by detailed studies on cost-benefit and economic analyses. Investors do thorough feasibility studies that cost a lot of money before committing their money.”

Information gaps

During a courtesy visit to the Albertine region in 2017, local leaders at Got Apwoyo sub-county headquarters voiced similar sentiments. A riled L.C 3 Chairperson particularly wondered why crude oil would be transported to the central processing facility
(CPF) in Buliisa district via a network of pipelines yet it would be extracted from Murchison Falls National Park which is in Nwoya district.

Didas Muhumuza, Extractives Governance Coordinator at AAIU, narrated how during his time at Tullow Oil as a community liaison officer, got wind of information that young people in Hoima were planning to beat him up because they contended that
oil companies were discriminating against them and that he was their agent in doing so.

“I communicated to the management teams in Uganda and the UK about the situation but also advised that the problem was due to lack of information among the population. We thus devised a strategy to start regular sensitization of all stakeholders through radio and workshops. Some introductory training(s) to oil and gas aspects were also undertaken,” he said. This was very helpful in ameliorating the situation overall.

Twebaze Paul, a civil society stakeholder in the sector, once shared a story of how he and a team of colleagues were given an ultimatum of an hour to exit Amuru district by security people after their meeting to brief the community about
the sector was stopped.

“Talking about oil then was risky. In 2012 we went to Amuru to talk to the community about oil and how the resource can benefit everyone and not become a curse. Security people arrested us and tasked us to explain who had given us authority to talk about oil,” he narrated.

Muhumuza noted that lack of information among the general public remains a challenge. However Ronald Kaija, Senior Community Relations Officer at CNOOC Uganda, the developer of the Kingfisher oil fields, says information is now more readily
available across many public domains but it is upon the young people to seek it out.

“Recently we have held public hearings on the ESIA report for the Kingfisher Development Area (KFDA). How many have accessed or tried to read this technical extract explaining what we are going to do?,” Kaija asked participants while showing the
copy that was freely distributed at the hearings.

Notably the public hearings were commended by civil society actors as a step in the right direction in as far as access to information is concerned. James Muhindo, the Coordinator of the Civil Society Coalition on Oil and Gas, noted that the
hearings were unprecedented and presented an opportunity for the people to get involved in the sector by being heard and appraised on its developments.

The entrepreneurship development workshop(s) presented a unique opportunity for participants to appreciate the challenges of operating a business in a very intricate oil and gas sector with very high competitiveness. Participants, mostly drawn from the districts of Hoima, Kikuube, Buliisa, Masindi, Nwoya, Amuru and Gulu districts also shared their experiences of exploiting business opportunities in the Albertine region amidst the oil developments that have thus far taken place. They have been provided with vital insights on what opportunities the development (and production) phases will provide.

Participants were also tipped on skills and knowledge on how to go about doing business in the oil industry by appreciating the standards that have been set by government (and oil companies) for those willing to conduct business in the sub-sector as
it gears for transition into the development and production phase(s).

Jackson Etwop, a social movement’s facilitator and motivational speaker, spoke to participants in Acholi to drive home the message of mindset change and hope. “We are our own obstacle to changing our situation. Opportunities are there and amongst us are fellow youth that have made it and can inspire us. Unless we change the mindset we will not change our situation”. Jackson emphasized. The clinics shall be concluded in Pakwach district but the participants shall be followed up to ensure appropriate measurement of impact of the trainings undertaken.

By Robert Ben Mwesigye
Edited by Muhumuza Didas

Local people from districts that will be traversed by the East African Crude Oil Export Pipeline (EACOP) project want government and oil companies to grant special treatment in the oil pipeline related jobs. Government and joint venture partners – Total E&P Uganda, CNOOC Uganda Ltd and Tullow Oil Uganda are currently engaged in land acquisition processes for the pipeline.

“At the beginning of the project, we were told that our local people with the requisite qualifications, would be given jobs. But now, even Community Liaison Officers (CLOs) and even drivers are from other districts,” George William Katokoozi, the Chairman, Sembabule District Land Board (DLB) recently told Oil in Uganda. He explained that excluding pipeline host communities from oil jobs is setting a bad precedent and could be the beginning of the “oil curse”. “We have some of our sons and daughters who are qualified. We have drivers from Sembabule, why can they not be given jobs in New Plan, ICS and other companies working on the EACOP. Why are our local people being discriminated against?” Katokoozi angrily wondered.

The 1,445 kilometre heated pipeline will traverse the districts of Hoima, Kikuube, Kakumiro, Gomba, Sembabule, Lwengo, Kyotera & Rakai on the Ugandan side. These districts will host a series of infrastructure projects such as construction camps, pump and heating stations among others. Speaking at Mbirizi Catholic Social Centre in Lwengo district, Ssensalire Christopher, Lwengo district Vice Chairman concurred with Katokoozi. Ssensalire wants EACOP related companies to put a certain percentage of qualified local persons they should employ from EACOP affected districts. “One of the ways through which our local people can benefit from the oil and gas sector is local employment. So, our people are side-lined, as leaders we get concerned,” Ssensalire said.

FEARS

Local leaders also expressed fears that some of the irregularities experienced in land acquisition for the proposed oil refinery could be repeated in land acquisition for the pipeline. “We have heard complaints of delays in compensation from people in Hoima [people affected by the oil refinery]. We need an assurance that such delays will not be repeated in the EACOP affected districts. It is a fear calling for serious action and is expressed by the project affected persons,” Ssensalire said. He asked government to consider training project affected persons (PAPs) on financial literacy before compensation to ensure that PAPs do not put compensation money to waste.

“There are some things they may not do to save, so leaders should be vigilant. He challenged leaders in Rakai and Kyotera to understand the value of compensation rates and fight to get fair rates. They should mind about their people. Leaders should work for the interest of their people,” he explained.

Ssenyonjo Stephen, Chairperson Local Council III of Lwebitakuli Sub-county, Sembabule district asked district leaders where the oil pipeline passes to press government to have meaningful Corporate Social Responsibility (CSR) for better delivery of benefits to the local populations.

By: Edward Ssekika,
Edited by Muhumuza Didas

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 24^th 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

The move is meant to curtail government’s uncontrolled withdrawals from the Petroleum Fund to finance budget deficits and/or priorities.

Members of Parliament on the Natural Resources Committee have called for an amendment of the Public Finance Management Act to introduce a cap on how much oil revenues can be withdrawn from the Petroleum Fund to finance budget priorities.

The MPs proposal is contained in the report of the Parliamentary Sectoral Committee on Natural Resources on the Ministerial Policy Statements and budget estimates for 2019/2020 dated April 2019.

The introduction of a cap, MPs argue, will curtail the uncontrolled withdrawals of revenues from the Petroleum Fund to finance budget priorities. For instance, according to the report Shs 125 and 200 billion was withdrawn from the Petroleum Fund to finance budget priorities for the financial years 2017/2018 and 2018/2019 respectively.

According to the Appropriation Act, 2019, government will further withdraw Shs 445.8 billion from the Petroleum Fund to finance budget priorities for this financial year (2019/2020). As at December 30, 2018, the balance in the petroleum fund stood at Shs 288.7 billion.

“Parliament should amend sections 58, 59 (1) – (7) of the PFMA, 2015 to introduce a cap on how much oil revenues can be appropriated to the consolidated fund or the investment reserve by Parliament,” the report reads in part.

The Public Finance Management Act (PFMA) 2015, ring fences oil revenues for only infrastructure projects and development. However, the MPs noted in the report, it was not clear whether the oil revenues so far withdrawn from the petroleum fund have been spent on infrastructure projects. The Auditor General has noted in various reports, that there are no assurances as to whether the withdrawals from the Petroleum Fund are actually financing infrastructure and development projects because the Appropriation Act often does not disclose the purpose of the withdrawals.

“The law [Public Finance Management Act, 2015] should be amended to sufficiently provide a format for the Appropriation Act which shows, purpose, activities and amount of petroleum funds to be appropriated under the consolidated fund or transferred to the investment reserve account,” MPs further recommend in the report. This will ensure that oil revenues will be managed for the benefit of current and future generations.

MPs also noted the lack of an investment policy and profile to guide infrastructural and developmental projects eligible for financing by petroleum revenues.

“An investment profile of oil revenues should be developed so as to guide the balanced growth and sustainable development of Uganda. This would be essential in profiling infrastructure and development projects eligible for financing by petroleum revenues,” MPs recommended.

Weighing in on the proposal, Didas Muhumuza, the Extractives Governance Coordinator (and Managing Editor of the Oil in Uganda magazine and website) at Action Aid International Uganda (AAIU) said a review of the law is long overdue. “The proposal is a good mechanism that will provide the much needed checks and balances for better control of the financial in-flows and out-flows from the Petroleum Fund and ensure better management of oil revenues for the present and future generations,” Muhumuza noted.

However, with weak enforcement of laws plus regulations, it remains unclear whether a review of the law can curtail government’s appetite for oil revenues.

by: Edward Ssekika,
Edited by Muhumuza Didas

Gov’t maintains that all the assessed taxes should be paid.

The proposed farm- down of part of the assets of Tullow Uganda Operations Pty Ltd to Total E&P Uganda and CNOOC Uganda has been terminated following the expiry and non- extension of the Sale and Purchase Agreement (SPA), Tullow Oil Plc has announced. Tullow Uganda Operations Pty Ltd is a subsidiary of Tullow Oil Plc – a British oil giant.

In the statement, Tullow noted that the company was unable to secure the extension of the Sale and Purchase Agreement (SPA) with its Joint Venture Partners – Total E&P Uganda and CNOOC Uganda Ltd despite previous extensions having been agreed upon by all the parties. In a brief statement, Tullow said it has been informed that its farm-down to Total E&P Uganda BV and CNOOC Uganda Ltd will terminate on August 29, 2019 following the expiry of the Sale and Purchase Agreement.

“Tullow has worked tirelessly over the last two and a half years to complete the farm-down which was structured to re-invest the proceeds in Uganda,” Paul McDade, the Chief Executive Officer (CEO) of Tullow Oil Plc said in a statement. McDade noted that Tullow committed to reducing its operated equity stake in Uganda.

He added, “It is disappointing to report this news at a time when we are making so much progress elsewhere towards the growth of the Group with our recent oil discovery in Guyana and first export of oil from Kenya.”

The termination of the transaction, McDade further said is a result of being unable to agree on all aspects of the tax treatment of the transaction with the government of Uganda which was a condition for completing the Sale and Purchase Agreement.

“While Tullow’s Capital Gains Tax [CGT] position had been agreed as per the group’s disclosure in its 2018 Full Year Results, the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of the tax relief for the consideration to be paid by Total and CNOOC as buyers,” the statement reads in part.

ENTER THE TAX DISPUTE

In January 2017, Tullow 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). The farm-down has to be approved by government upon satisfaction that the relevant taxes – in this case, Capital Gains Tax has been paid.

After the announcement, Uganda Revenue Authority slapped a $ 167 million (approximately Shs 617bn) tax bill on Tullow for its proposed farm-down. Tullow objected on grounds that given the costs it had incurred, $167m tax bill was not correct and that it intended to re-invest the money in the country– sparking a stalemate.

As a result, Tullow sought for a political settlement to a tax dispute with President Museveni who in meetings with the company bosses insisted that the tax dispute should be settled with URA and not him.

However, in the statement Tullow said the company will initiative a new sale process to reduce its 33.33 percent operated stake in the Albertine project. The termination of the transaction is likely to further delay the Final Investment Decision (FID). Joint Venture Partners had initially agreed to make a FID by the end of 2019.

GOVERNMENT RESPONDS

Weighing in, Robert Kasande the Permanent Secretary, Ministry of Energy and Mineral Development defended government’s position. He insisted that Tullow has to pay Capital Gains Tax from the farm down. “The government’s position is that the assessed tax should be paid in line with the laws of Uganda,” Kasande indicated in a statement.

In another statement, Total said it was still committed to Uganda. “Despite the termination of this agreement [Sale and Purchase Agreement], Total together with its partners (CNOOC and Tullow) will continue to focus all its efforts in progressing the development of the lake Albert oil resources,” Arnaud Breuillac, Total’s President in-charge of Exploration and Production said.

By: Edward Ssekika
Edited by Muhumuza Didas

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

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

“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.

Not all about oil

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.

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.

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

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

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

A CASE FOR KARAMOJA EXPLORATION

By Edward Ssekika

Oil.Uganda@actionaid.org

Karamoja is believed to be highly mineralized hence attracting hordes of interest from investors and speculators alike. The sub-region, only recovering from a long stretch of civil strife, is embracing urbanization and opening-up for development, notably in the mining sector.

The local leadership is waking up to the reality of the developments taking place and getting smarter in dealing with investors having gone through a couple of bad experiences dealing with mining companies.

The trend of mining companies like Jan Mangal, Dao Marble and a host of others venturing into the region, getting minerals and disappearing is however being checked as the leadership there begins to negotiate better deals to benefit the host communities and the local governments.

Uganda Development Corporation (UDC) has recently negotiated an equity stake in a limestone mining company venturing in Moroto. David Pulkol, the director of African Leadership Institute, revealed that as Moroto district local government, they valued the acreage of their land where the mineral is to be mined at Shs. 5.5billion as capital contribution to the company.

Additionally, of the 45% stake that will go to UDC, they are entitled to 5% of it, “however, we are still negotiating for a bigger percentage on that 45%,” said Pulkol at the Citizens’ Convention on Mining, 2019.

David Pulkol, Director of the African Leadership Institute sharing during the Citizens Convention on Mining

Pulkol made reference to neighbouring Turkana County in Kenya that stands to benefit 20% from the oil production while the community would be entitled to 5%. “However, when you look at Uganda’s case, Bunyoro Kingdom as a beneficiary host community will get just about 1%. As Moroto district local government we have said we have to benefit from these resources,” he said.

He explained that the local people of Karamoja must benefit from the mineral resources by taking into account complimentary growth.

“Foreign investors, influence peddlers and those with political power and authority are depriving mineral host communities of their livelihoods,” said Pulkol.

“In the aftermath of the second world war in 1945, Egyptians came to Nadunget and established irrigation systems to solve an acute water problem. The locals that owned these lands were profiled and even compensated instead of just chasing them away,” he explained.

The principal private secretary to the chief administrative officer Moroto, noted that as Karamoja experiences an influx of investors they must prepare and sieve the serious ones from the speculators that the sub-region has experienced over time.

Pulkol urged other local government authorities to learn from their model and ensure their people benefit from mineral resources by engaging mining companies more beneficially.

The Stanbic bank Chief Executive Mr Patrick Mweheire chats with officials at the newly created Agriculture Enterprise centre in Hoima. PHOTO BY F. MUGERWA

In a bid to build capacities of local farmers in the oil-rich Bunyoro sub-region, Stanbic bank has opened an Agricultural Enterprise Development centre in Hoima district. Located in Bujumbura division, Hoima Municipality, the centre wants to empower farmers to tap the agricultural market in the oil and gas sector.

The centre will empower, train farmers and expose them to capital and partnerships that will enable them meet the standards required to supply food to the oil market. The centre is meant to expand the bank’s incubation programme that is aimed at empowering and improving on Small and Medium Enterprises (SMEs) in the country, bank officials said.

The centre was launched in partnership with Tullow Uganda Operations Pty Ltd this November 2019 and it will train farmers in business management, expose them to financial resources and markets, says Tony Otoa, Stanbic bank’s head of Enterprise Development.

“The centre will help in addressing agribusiness challenges in the Albertine graben districts. We have partnered with Tullow Uganda to amplify our SME training programme in the Albertine region” he says. According to Otoa, the bank and its partners have so far invested over Shs 500 million in setting up and operationalizing the centre. He said in partnership with CNOOC Uganda Ltd, Total E&P Uganda in collaboration with Self Help Africa and the Petroleum Authority of Uganda, Stanbic bank undertook a study in Hoima, Kikuube, Nwoya and Buliisa to assess the capacities of farmers to supply the oil and gas industry.

According to the study, many farmers were found to be engaged in subsistence agriculture, producing quantities of food that are not sufficient for consumption and meeting the commercial demands and standards of the oil industry.

The Stanbic bank Chief Executive (in Uganda), Patrick Mweheire says the bank will continue empowering SMEs to grow since they play a key role in economic development. “As part of our commitment to growing SMEs in Uganda, particularly in the agriculture value chain, we have taken the business incubator programme to regions starting with the Agriculture centre in Hoima. We shall also launch regional business incubation centres in Gulu, Mbale and Mbarara later this year” Mweheire shared.

He said the bank has so far trained over 1,000 SMEs and it will continue undertaking trainings that support small and medium scale enterprises. “We cannot achieve sustainable development without empowering and improving on SMEs which are playing a vital role in Uganda’s economy. Since we are interested in inclusive growth, we are spending and training them so that we touch the lives of many people who are engaged in such enterprises” he says.

According to Jimmy Mugerwa, the outgoing General Manager of Tullow Uganda Operations Pty Ltd, during the oil exploration phase, Tullow partnered with Traidlinks to start an agriculture supply chain programme that improved on the capacities of farmers to be able to supply goods and services to oil operations. He says the centre had over 2,500 farmers supplying food to oil camps, Kampala and other markets.

“We are hoping that people will take advantage of this agriculture development programme to improve on their productivity, agronomy practices, post-harvest handling and marketing” Mugerwa hinted. He further said as the country prepares for commercial production, people should improve on their business operations and tap the opportunities in the oil industry, agriculture, tourism and business sectors.

Locals in the oil-rich Bunyoro region have been accusing oil companies of side-lining them in accessing opportunities in supplying goods and services in the oil and gas industry.

The Petroleum Authority of Uganda (PAU) which regulates oil developments is conducting registration of suppliers under the national supplier data base where oil firms and contractors source for suppliers. PAU’s Corporate Affairs and Public Relations Manager, Gloria Ssebikari says all farmers, business firms and contractors who want to tap into businesses in the oil and gas industry should enrol on the National Supplier Database (NSD). Created in 2017, the database has over 1,500 registered businesses.

Estimated cumulative value retention worth $ 900 million (28%) is reported to have remained in the Ugandan economy arising from the initial oil and gas exploration phase. More than $ 20 billion are expected to be invested in the upcoming phase of development (of the up-stream and mid-stream segments). This value is phenomenal and definitely calls for greater involvement of local businesses and stakeholders so at to enable real economic transformation with a “human face”

Tullow oil Uganda’s General Mnanager Mr Jimmy Mugerwa (in Red) and Bunyoro leaders listen to Mr Abdul Nasser Segawa, a computer expert during the launch of computer labs in Bunyoro at Kaiso Primary school recently

Tullow oil has hailed Uganda’s oil and gas project which it has described as one of the best in Africa.

“At the moment, the Ugandan (oil) project is one of the best projects in Africa. What we need is to try and get it the final investment decision and we are continuing working with Government in negotiating on commercial agreements,” the Tullow Uganda out-going General Manager, Jimmy Mugerwa said.

Mugerwa made the comments during his recent visit to Hoima district where Tullow oil donated 4 Solar-powered Computer Laboratories to Government aided Primary Schools in Hoima and Buliisa Districts.

Mugerwa has since been elevated to a post of corporate head of infrastructure and organization at Tullow Oil Plc.

In August this year, Tullow Oil’s negotiations regarding its farm-down of significant stake to Total Uganda and CNOOC were terminated following the expiry of the Sale and Purchase Agreements (SPA) for the same.

Tullow announced that it was unable to secure a further extension of the SPA with its Joint Venture Partners, despite previous extensions to the same having been agreed by all parties.

According to Tullow, the termination of this transaction was a result of being unable to agree all aspects of the tax treatment of the transaction with the Government of Uganda which was a condition to completing the SPA.

Oil in Uganda understands that the collapse was a result of disagreements between the Ugandan Government and Tullow Oil over the capital gains tax.

Tullow Oil wanted a tax waiver on its transaction with Total and CNOOC while the Ugandan Revenue Authority and the Joint Venture Partners could not agree on the availability of tax relief for the consideration to be paid by Total and CNOOC as buyers.

In its statement, Tullow said it will now initiate a new sales process to reduce its 33.33% Operated stake in the Lake Albert project which has over 1.5 billion barrels of discovered recoverable resources and is expected to produce over 230,000 bopd at peak production.

The Joint Venture Partners had been targeting a Final Investment Decision for the Uganda development by the end of 2019, but the termination of this transaction will lead to further delay of the FID and hence delay the commencement date of Uganda’s oil production.

Total E&P Uganda, CNOOC Uganda and Tullow Oil have scaled down their field activities pending the outcomes of their boardroom negotiations with the Ugandan government over the capital gains tax issues that stalled Tullow’s farm down.

“We have not closed shop or suspended activities. As you can see, we are still working” Mugerwa said. He says after the FID is made, it will pave way to Uganda achieving first oil production.

When asked about what Uganda should expect from Tullow Oil, Mugerwa seemed to suggest that the FID will unlock many opportunities for Ugandans.

“Once this project gets FID, we shall commit a lot of money as oil companies, and many Ugandans will get employment and other opportunities. Your prayer should be us reaching the FID” he says.

Tullow Oil has enjoyed back to back oil discoveries in Uganda’s Albertine basin and alongside oil exploration, the firm claims to have spent over $ 5 million on social investments.

“We have built schools, health centres, sponsored over 100 students in post graduate studies in different disciplines and initiated several social investments because we believe in creating shared prosperity” he said.

Tullow’s Information, Communication and Technology support

Recently, Tullow Uganda Operations Pty Ltd handed over four computer labs and 65 computers to four government primary schools including; Ndandamire Primary school and Buliisa Primary school (all in Buliisa), and Kaiso Primary school and Kyehoro Primary school (all in Hoima District).

Mugerwa underscored the impact of ICT in development and asked teachers, oil industry players, and government to provide and equip the younger generation with the right tools and skills that will prepare them for life in the digital era. Let us inspire pupils to be curious and interested in careers in the ICT world at an early age, mainly because they are the next generation of computer scientists and professionals, he says.

The Tullow Alumni Group Uganda (TAGU) trained 65 teachers in computer literacy, who in return will pass on this knowledge to over 3,500 pupils who are set to benefit from the project. The backdrop of this initiative is the reality that majority of the schools surveyed in Buliisa and Hoima district did not have any computing facilities for both administrative and teaching purposes, largely because they could not afford to buy the equipment.

The Hoima District Education Officer, Godfrey Sserwanja who represented the Permanent Secretary in the Ministry of Education and Sports, said ICT has been a missing gap in most schools. The benefiting schools might be model schools because they will be among the first few to have computers in the region, Sserwanja says.

He said computers will ease teaching and learning since learners will easily be shown videos and images about subjects they will be taught.

Mr. Kadiri Kirungi, the Hoima district Chairman asked oil companies to scale up initiatives aimed at improving the welfare of the people. We want to see what each oil company is doing for our people. Many people are running to us complaining that they are sidelined in employment opportunities. We want companies to be proactive towards the concerns of our people, Kirungi said.

In the FY 2019/20, Government allocated Shs146.2 billion to the ICT sector.

Tullow Oil is a leading independent oil & gas, exploration and production company. The Group has interests in over 80 exploration and production licenses across 15 countries.

President Yoweri Museveni has re-appointed six members of the board of directors of Uganda National Oil Company Limited. In a letter to the Speaker of Parliament Rebecca Kadaga dated November 12, 2019, the President also dropped one board member, Grace Tubwita Bagaya and replaced her with city lawyer, Zulaika Mirembe Kasajja – a partner at Kampala Associated Advocates (KAA)

“In exercise of the powers vested in the President by Section 44(1) of the Petroleum (Exploration, Development and Production) Act, I have appointed the persons listed as Chairperson and members of the board of the Uganda National Oil Company,” the president wrote.

The board is headed by Emmanuel Katongole an economist and businessman. Katongole is a co-founder and chief executive officer of Cipla Quality Chemical Industries Limited – a leading pharmaceutical company and major supplier of anti-retroviral drugs in Uganda. He has been at the helm of UNOC since October 2015, when the President first inaugurated the board.

Other members of the board are Francis Nagimesi – a former Chief Executive Officer of the defunct Coffee Marketing Board, Francis Twinomatsiko, a principal economist in the Ministry of Finance, Planning and Economic Development (MoFPED), Irene Pauline Batebe, a chemical/refinery engineer in the Directorate of Petroleum in the Ministry of Energy and Mineral Development, Biwaga Stella Marie, a lawyer working with FIDA, Uganda, Godfrey Andama a senior geoscientist, and Zulaika Mirembe Kasaijja, a city lawyer and partner with Kampala Associated Advocates (KAA). The appointees await parliamentary approval.

However, the letter does not reveal the tenure of the board of the directors. The Petroleum (Exploration, Development and Production) Act is also silent on the number and tenure of members of the UNOC board.

Uganda National Oil Company Limited is established by Section 42 of the Petroleum (Exploration, Development and Production) Act, as company which shall be wholly owned by the State to manage Uganda’s commercial aspects of petroleum activities and the participating interests of the State in the petroleum agreements.

Currently, UNOC has 2 wholly owned subsidiaries – Uganda Refinery Holding Company Limited headed by Michael Nkambo Mugerwa as a General Manager and Uganda National Pipeline Company Ltd headed by John Bosco Habumugisha as the General Manager.

UNOC manages the Jinja Petroleum Storage Terminal which has a storage capacity of 30 million liters together with One Petroleum Limited. Though its subsidiary – Uganda National Pipeline Company Limited, UNOC will own 15 percent equity in the East African Crude Oil Pipeline Project (EACOP), up to 40 percent in the oil refinery and 51 percent in the Kampala Storage Terminal to be located in Mpigi district.

We’ve been thrown in the oil shadows-Nwoya, Packwach, Nebbi District leaders speak out

Mines Director Katto Orders All Illegal Artisanal Miners Out of Mines

East African Crude Oil Pipeline: The Inside Story

Uganda works to phase out mercury usage

Hoima residents demand for ‘oil jobs’

Ministry, ActionAid to launch project to register ASMs

Uganda’s journey to EITI

Youth cautioned to dispel oil politics, focus on tapping opportunities

EACOP affected districts want more jobs for local people

Tullow, Government in a fresh protracted fight over capital gains tax

Parliament calls for stringent fiscal rules on the management of oil revenues

Tullow’s Shs 3 trillion farm-down to Total and CNOOC terminated over a tax dispute

Shs 2 trillion Oil Revenues Already Spent

Mubende miners count losses after ruthless eviction

We’ve been thrown in the oil shadows-Nwoya, Packwach, Nebbi District leaders speak out

Mines Director Katto Orders All Illegal Artisanal Miners Out of Mines

Moroto Local Government pilots mineral benefit sharing scheme

How Hoima the Agri-business Incubation Centre plans to support farmers

Tullow Treasures Uganda’s Oil Project, Says General Manager

Museveni re-appoints the board of directors of UNOC