Public Dialogue on Petroleum Bills 24 By Shem Byakagaba Dialogue on... · The Petroleum...
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Public Dialogue on Petroleum Bills At Uganda Museum
24th, May, 2012
By Shem Byakagaba
Legal Consultant
Executive Director, KHEDA
Contacts: Mob. +256 772 433440 [email protected]
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Presentation outline Introduction
Constitutional provisions
The National Oil and Gas Policy
The Petroleum (Exploration, Development and Production) Bill 2011
Institutional arrangements
Licensing
The Mid stream Bill
General comments
Recommendations
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Introduction
Uganda has discovered huge commercial quantities of oil and gas which has attracted attention of national and international actors.
The country has made many strides in exploration and production is about to be undertaken.
Oil & Gas Exploration in the Albertine Graben
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Introduction cont…
The legal framework is still weak, i.e., the Petroleum (Exploration and Production ) Act, Cap 150.
Uganda passed the National Oil and Gas Policy which is yet to be enabled by law.
Oil is a unique, finite resource with a lot of positive and negative impacts on the socio-economic equilibrium of a country. It needs special regulation.
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Article 244 of the constitution
244(1) Subject to clause (2) of this article, Parliament shall make laws regulating:
a. The exploitation of minerals,
b. The sharing of Royalties,
c. The conditions of payment of indemnities arising out of exploitation of minerals and
d. The conditions regarding the restoration of derelict lands.
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Constitution contd…
Art 244(2) provides that:
Minerals and mineral ores shall be exploited taking into account the interests of the individual land owners, local governments and the Government.
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The national Oil and Gas Policy, (NOP)
2008
Section 5(1) lays down the guiding principles in the development of the oil and gas in Uganda;
a) Using finite resources to create lasting benefits
b) Efficient resource management
c) Transparency and accountability
d) Competitiveness and Productivity
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NOP cont’d…
e) Protection of the environment and conservation of the Bio-diversity
f) Spirit of cooperation
g) Capacity and institutional building.
NB: The objectives of the policy are consistent with the guiding principles of the NOP
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NOP cont’d...
The NOP provides for the following regulatory framework;
Parliament
Cabinet
Ministry responsible for oil and Gas
The Petroleum Authority of Uganda (PAU)
National oil Company
MDAs
Civil society and Cultural institutions
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The Petroleum (Exploration, development and
Production) Bill 2012
The Bills objectives are inter alia;
To give effect to Art 244
To regulate petroleum exploration, development and production
To establish the Petroleum Authority of Uganda
To establish the National oil company
To regulate the licensing and participation of commercial entities, etc
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The purpose of the Act
The purpose of the Act is to operationalise the National Oil and Gas Policy by:
Creating a conducive environment for the efficient management of petroleum resources
Establishing institutions to manage the petroleum resources
Regulating petroleum activities Providing optimal social economic benefits Ensuring public safety and protection of
public health and environment. Supporting the development of state
participation and national content.
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Institutional arrangements
Clause 9 establishes the functions of the minister to include:
Granting and revoking a license
Initiating legislation, etc
Negotiating petroleum agreements
Approving data management systems
Any other function incidental or consequential to his or her functions
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Comments on the Minister
The minister is loaded with too many functions and powers notwithstanding the many institutions created.
There is need to nurture and harness the young technical institutions without undue influence from the political class
The Bill does not provide for the institutional checks against the powerful minister!!!
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The Petroleum Authority
The Bill establishes the Authority to monitor and Regulate exploration, development and production of petroleum in Uganda
It is a body corporate with wide ranging functions BUT mainly playing an advisory role to the minister!!!
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Independence of the Authority
Clause 14(1) provides that;
“The minister may give directions in writing to the Authority with respect to the policy to be observed and implemented by the Authority, and the Authority shall comply with those directions”
Clause 15 states;
“The Authority shall subject to section 14(1) be independent in the performance of its functions duties and exercise of its powers.”
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Comments..
The Authority is subsumed under the minister and the independence given under one hand is taken away by the other!!
This is compounded by the minister being the appointing Authority of the Board and the recipient of the Authority’s reports.
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The National Oil Company (NOC)
Clause 41 establishes the NOC to be incorporated under the Companies Act to manage Uganda’s commercial aspects of the petroleum activities and the participating interests of the state in the petroleum agreements.
KEY: The Bill does not state the detailed nature of the
company, the shareholding, directorship and
management. Will Parliament have an input at the stage of incorporation?
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Licensing
The Bill in clauses 48– 92 provides for;
Reconnaissance permits
Petroleum exploration license and
Petroleum production license
Production permit
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Licensing cont’d
In all these stages, the minister is the responsible person with the advice of the Authority.
There are no other Agencies as envisaged under the Oil Policy that are involved.
The role of Cabinet and Parliament ought to be highlighted.
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The Petroleum ( Refining, Gas
processing and Conversion,
Transportation and storage) Bill,
2012
This is the mid stream bill to deal with refining, processing, transportation and storage.
Its key to understand the relationship between upstream and midstream through the linkages.
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Mid stream contd….
This presents diverse environmental concerns through the refinery, pipelines, and other forms of transportation
The socio-economic impacts especially on land spread all over the country needs to be assessed
Is the country and the NOC for equity participation or a mere observer participant?
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Mid stream contd…
Oils spills occur most at this stage
What will happen to the infrastructure after oil? Decommissioning under mid stream is more complex!
What is the country’s capacity not only to participate, observe but more importantly to regulate?
We need to agree what to put in the Act, Regulations and Agreements.
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State participation and National
Content
The Bills provides for areas of state participation and national content which include;
Participation in petroleum activities.
Provision of goods and services by Ugandan entrepreneurs.
Training and employment of Ugandans
Training and technology transfer
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State participation contd…
Issues:
What is the capacity of the local companies/ entrepreneurs to participate?
The Bills do not obligate the licensee on the magnitude of the local content and the duration of achieving this.
There is no distinction between “National” and “host community” local content.
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Environmental Issues
The Bills do not sufficiently provide for detailed environmental requirements. These may be covered under the current environmental laws which are inadequate in as far as they were not cognizant of oil exploration and production.
There is a requirement to comply with the general environmental principles. The second bill singles out waste management; why? Its hoped that the different environmental laws will soon be amended to bring them in tandem with the industry developments
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Why bother about environment
mitigations?
All across the Niger Delta exposed oil pipelines like these criss-cross
communities. Decisions on the laying of these pipelines were taken
without consulting these communities. Now ageing, many of these
pipelines have become fire-traps.
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A ruptured pipeline unattended to. After three months there
was a massive fire outbreak that claimed over 50 lives.
Why bother about Environment Mitigations?
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Access to Information Whereas clauses 149 to 151 emphasize
confidentiality in the industry, there is need to recognize that secrecy and general lack of transparency leads to lack of Accountability and the corruption that has defined the industry all over the world.
There should be specific mechanisms for the different bodies and the public to access information. The provisions of the Access to information Act should not be qualified by this Bill.
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General Comments
The role of parliament is conspicuously absent!
Where is the role of regional and district leadership?
Whereas the Oil policy provides for the role of civil society, the Bills are silent.
Where is the role of the Kingdom?
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Stabilization Clause 188 stabilizes pre existing contracts
However, there is no specific provision for stabilization on other issues. These normally would include changes on the general legal regime, environment laws, fiscal policies, etc.
Will these be dealt with in the individual agreements? Best practice requires to have them regulated in the Act to avoid arbitrariness.
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Recommendations In order to realize the aspirations of
Ugandans, there is need to have an effective and efficient institutional framework to manage the whole value chain of the petroleum industry
Parliament as the representative of the people and the
chief oversight Agency, MUST play a role wider than
legislative. It needs to RATIFY all agreements that the
country enters into. It MUST also receive and discuss
reports from the sector institutions
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Recommendations cont’d..
Given the importance of the petroleum resource to this country, all Agreements and licenses should be approved by Cabinet. This provides a check on the line ministry and the other Agencies that are involved in the industry.
The Ministry of Energy should through its strengthened structures coordinate the policy, legislation, licensing, and negotiation of Agreements
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Recommendations cont’d.. The Petroleum Authority should be established
with independent and adequate powers to
monitor and Regulate the industry. Their role
should be overarching to cover all players in the public and private sector. Their independence is
key.
Whereas the NOC is crucial, its establishment
must be clear in terms of nature, shareholding, directorship and citizenship participation. As the
business arm of the government, the History of
government doing business should be a good
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Recommendations cont’d..
Other Regulatory and oversight agencies like NEMA, URA, IGG, Auditor General, DPP and Police need to be strengthened in order to handle the complex issues arising from the petroleum industry
There should be deliberate interventions to build the capacity of the private sector, civil society and cultural institutions if local content, national participation and citizenship oversight is to be realized.
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Recommendations contd…
The role of Local and regional governments needs to be highlighted.
The cultural institutions need to be taken care of even if it requires amending some of the existing legislations
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Life and all its complexities leave us
scratching our heads at times. Thankfully,
others have been down the same path we
are now on, and have left us their wisdom
and advice. With their carefully crafted
words, they can lift us up, inspire us and
help us see that what we are experiencing
isn’t just unique to us, that others have
faced the same peaks and valleys and
conquered them.
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Uganda can make this oil a
blessing.
YES WE CAN
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