Local Content Considerations in Uganda's Petroleum Sector

7/28/2019 Local Content Considerations in Uganda's Petroleum Sector

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LOCAL CONTENTCONSIDERATIONS IN UGANDA'sPETROLEUM SECTOR



Oil and Gas Workshop for Ugandan Legislature February 2010

What is local content promotion? Strategies to maximize the benefits from

domestic oil and gas development through

maximising the quantity of “local content”or “local value addition” in oil and gas

sector spending.




Factors limiting local social andeconomic development.

Inefficiencies in public sector expendituremanagement at national and provincial

levels;

Risks and volatility inherent in a public fiscal

regime dependent on mineral revenues, e.g.‘Dutch Disease’, mineral price variability;

Long cost-recovery periods




Local Content is a means toan end not an end in itself

The purpose is to increase national wealththrough – Economic growth

– More employment of locals

– Value creation in the country

– Local Participation

– Induced expenditure in the local economy

– Enhanced human capacity

– Technology transfer




Successful tools to build local

content Concession policies

Production sharing contract requirements

Technology transfer requirements

Tax incentives

Procurement & contract strategies

Support for SME’s and entrepreneurs

Mentor programs

Enterprise centers

Cluster programs & use of tax free zones




What will it take maximize Local Content?

It requires high Government commitment

It requires international oil companies to be

supportive It requires policies and contracts that will allow

service companies to invest in the country

It will require high focus on developing humanResources




Mapping/Identifying Obstacles toLC Promotion Lack of domestic manufacturing, fabrication

and service capabilities to support the oil andgas sector

Few people with the required skills,

Lack of adequate power, water and otherinfrastructure to support an expanded

manufacturing base Cumbersome bureaucratic obstacles to

development of capacities of small andmedium sized enterprises




Underdeveloped capital markets

Huge proportion imported equipment and

expertise must therefore be imported

Problem of clarity and stability laws andregulations

Capacity and skills in government

Fiscal monetary and budget discipline

Dialogue between government and civil society

Public sector/private sector Partnership




WHERE SHOULD THEGOVERNMENT FOCUS?

Exploration

Drilling, Well services and Rigs

Engineering Fabrication and Construction

Logistics (marine, water, land and air)

Consulting, and Professional Services



Uganda Petroleum Sector Governance - Parliamentarians Training February 2010

What is Uganda looking for?




Production sharing contracts can bean important tool Most developing countries have signed production

sharing contracts with oil companies

Most contracts tend to include requirements that couldbe used to expand

– local development

– Recruit nationals except when qualified persons not available

– Use local supplies, equipment, services and contractors if

competitive on performance, price and availability – Provide training

– But clauses can also be more specific on targets




KEY STAKEHOLDERS




Uganda’s Draft Local ContentPolicy Objectives

Maximize the benefits of oil and gas wealth

generation on a comprehensive local content

platform by:

Maximizing the use of local expertise, goods and

services, job creation for people, businesses and

financing in all aspects of the oil and gas industry

value chain and retention of the benefit within

Uganda




Develop local capability in all aspects of the oil and gas valuechain through education, skills and expertise development,transfer of technology and know-how and an active researchand development portfolio.

Achieve a degree of influence or control over development

initiatives local/domestic stakeholders Achieve at least 80 percent local content and local participation

in all aspects of Oil and gas industry value chain within adecade

Increase capabilities and international competitiveness ofdomestic business and industrial sectors

Create supportive industries that will sustain economicdevelopment




Proposed strategies Government to ensure Ugandan citizens participate in

the ownership of all business in the oil and gas

industry.

In this regard, the policy objective of Government is toprovide for the participation of a citizen of Uganda in

an interest of at least five percent in the explorationand production activities under petroleum licenses.

Gov’t to ensure that interest of the citizens of Uganda

shall not be transferable to a non-citizens of Uganda.




All operators in the oil and gas industry, shall as far aspracticable use goods and services produced by or

provided in Uganda for their operations in preference

to foreign goods and services.

The operators shall give priority to the purchase of

local products and services from citizens of Uganda if

competitive in terms of price, quality and timelyavailability.

A preference for Ugandan entities, even if they are up

to 10% more expensive is warranted.




'Where a foreign entity is to provide goods andservices for the licensee, the foreign entity shall

operate from Uganda and partner with a Ugandan

owned and registered company.

After the commencement of operations, theparticipation of Ugandans shall be at least tenpercent by value in the provision of goods and

services or as may be prescribed by regulations.

The percentage contribution shall increase to at least

twenty percent in the second year and shall increaseby at least ten percent each year thereafter or as may

be prescribed by regulations.




To what extent are theseproposals realistic?




Thank You




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Local Content Considerations in Uganda's Petroleum Sector

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