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Committee report on oil leaves Minister’s powers intact

International groups and Ugandan civil society activists have expressed disappointment with a long awaited Natural Resources Committee report that was finally tabled in parliament last Thursday.

For the last seven months the committee has held extensive public and private consultations on two petroleum bills to regulate the development of Uganda’s oil industry.  The draft bills, prepared by the Ministry of Energy and Mineral Development, were strongly criticised by civic groups for giving too much power to the Minister responsible for oil, with relatively little parliamentary oversight.

The committee’s report, a copy of which Oil in Uganda has seen, does not propose to trim the powers of the Minister, however.  It recommends the introduction of several clauses to ensure the involvement of parliament and cabinet in decision making processes, but the minister still remains supreme.

In some ways, the recommendations enhance the minister’s powers by giving him/her absolute control over the proposed National Oil Company (NOC) and National Petroleum Authority (NPA). In addition to holding, on behalf of the nation, 99 per cent of NOC shares, he/she will also appoint the Board Chairman of the NPA.

Key recommendations include:

  • Introduction of a model Production Sharing Agreement or any other Model Agreement which shall be submitted to Cabinet for approval and will guide negotiations of any future agreements
  • Penalties for corruption have been increased and specific offences introduced. Individuals in positions of authority who misuse their offices will be subjected to a fine of two hundred thousand currency points—a currency point is equivalent to 20,000 shillingsor imprisonment not exceeding four years, or both. On the other hand, an individual who offers a politician or a public official a bribe to influence his action in the process of negotiating an agreement shall be liable to a fine of two hundred thousand currency points or imprisonment not exceeding twenty years or both.
  • The National Oil Company should be wholly owned by the State, with the Minister of Finance holding the remaining one percent of its shares
  • Licensees will be required to carry out an impact assessment in connection with the submission of any field development plan to allow for a wider scoped impact assessment and not only be limited to localised Environmental Impact Assessments.
  • The fine for a licensee who, without the approval of the Minister, vents or flares petroleum in excess of the quantities needed for normal operational safety, has been multiplied by five, to five hundred thousand currency points. The definition of pollution has been broadened to include emission of noise.
  • The training and recruitment of Ugandans shall take into account gender, persons with disabilities and host communities. “Host Communities” is defined as inhabitants of the district in which petroleum activities take place provided that a person must have lived in that district for a continuous period of not less than two years

International groups react

International watchdog, Global Witness, has released a critique of the report, emphasising that transparency had not been sufficiently addressed in the recommendations of the committee. The group urges the government of Uganda to join the EITI and publish all incoming payments, “particularly now that the US has passed legislation which requires all US listed extractive companies to disclose the payments they make to foreign governments”. Both CNOOC and Total are listed on the New York stock exchange.

The group also calls on MPs and others to “carefully consider the administrative capacity of institutions to deal with large influxes of capital and the likely corruption risks associated with this influx if there are inadequate accounting and oversight mechanisms”.

Report by CM