sharing in governance of extractive industries

Uganda: Ignoring MPs' resolutions doesn't bode well

On February 3, 2012, the media was awash with news of signing of new production sharing agreements (PSAs) between Tullow Oil and Government of Uganda.

The gusto and excitement that surrounded this signing is proof that Uganda’s nascent oil and gas sector will never be the same again. It should be noted that this is not Uganda’s first PSA; so, the euphoria surrounding this particular one speaks volumes and there is more to it than meets the eye.

To begin with, the signing of this PSA comes at a time when a parliamentary resolution slapped a ban on any oil transactions until the necessary comprehensive laws have been put in place.  The government has been ferociously trading in high level legalese, explaining to unsuspecting Ugandans how some of their actions are not affected by this resolution.

The argument fronted is that this particular transaction is not new and has been on the tables for long. Perhaps this is the first time the government has tried so hard to explain its actions. Whichever way you look at it, it’s a positive sign for the young oil sector because previously, the government did not see any need to even inform Ugandans on how many PSAs have been signed, let lone explain to them the significance of the PSAs.

The insistence of government to go ahead with the transaction, irrespective of its legality, after Parliament had proposed a halt on oil transactions does not augur well for the good governance of the sector. One is left wondering what the executive is trying to prove by undermining the legislature. In doing so, the executive is, unknowingly, proving how it is not willing to listen to its people.

Parliamentarians represent Ugandans and when they speak, we expect those they speak to not to look at 375 legislators but at over 32 million Ugandans.  During the oil debate last October, petitioners informed Ugandans how Tullow’s licence to operate in the said blocks had expired and therefore it was premature to talk about the farm-down of their interests to France’s Total and China’s CNOOC.

In essence, Tullow could not sell what did not belong to them! As Ugandans, we could not tell whether the technocrats in the ministry of Energy and Mineral Development did not know about this anomaly to go ahead with the farm-down talk, even after the expiry of licences.

Even after these revelations, we did not see a remorseful ministry; instead, we saw a defensive team insisting the petitioners had ulterior motives and did not wish Uganda well. The call for transparency and accountability in Uganda’s oil sector is for the good of Ugandans. The government should engage in a frank discussion with all the relevant stakeholders and respect their views.

For the government to rely on high-level legal interpretation to defy the people’s voice is rather unfortunate. Given the circumstances surrounding Uganda’s oil, it would only be prudent for the government to show willingness to fix some of the gaps in the sector before going ahead with the signing of more documents.

Going ahead in this manner only serves to fuel speculation that some people have already been compromised. Oil companies operating in Uganda, and Tullow Oil in particular, must appreciate the need to secure the ‘social license’ to operate in Uganda. Granted, Tullow might get the signatures to continue with their exploration and production activities, but securing this against resistance from Ugandans is not good for their investments.

The argument of losing time to back up the rush does not add up because this is a long-term investment that will certainly outlive all the individuals involved. Ignoring institutions like Parliament and going ahead to deal with individuals, even if it’s the President, is not good practice for the companies.

We expect the oil companies to contribute towards a stable legal regime in the oil sector because it’s in their best interest too.

In June last year, the Arzebaijan parliament had to adopt a law on approving a resolution for the first amendments to a contract on exploration, development and production sharing of the Azeri-Chirag-Guneshli (ACG) offshore fields, initially signed in 1994, and for us in Uganda, we are basing on legal arguments to undermine resolutions of Parliament. In an ideal setting, the Ugandan Parliament should have even approved the new PSA. http://www.observer.ug/index.php?option=com_content&view=articl...

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Comment by JCM Bagaza on March 2, 2012 at 13:56

Deus, is Parliament against the Oil deal because from the value for money concerns or from the legal perspectives (absence of MP approval)? What really went wrong?


Comment by MUKALAZI DEUS on February 24, 2012 at 8:18

Aidoo, brief response to your questions.

1. The agreements in Uganda are not yet accessible. The ones that were signed before were deposited in the Parliamentary Library and can only be accessed by Members of parliament who are not supposed to photocopy. They can only read them from the Library.

However, the President, in an attempt to prove how he had negotiated a good deal for Ugandans, did highlight some of the contents of the new PSAs in his speech to parliament about the same. The full speech can be accessed on this link: http://tinyurl.com/75k7ctc

2. At the time of signing the agreements, a section of MPs had planned to apply for a court injunction against the transaction. Apparently, court was to sit at 2:00 PM to decide on the matter and the President, having gotten wind of it ordered his Minister of Energy to have the contracts signed at 10:00AM effectively pre-empting the court process. I doubt if there is much MPs can do at this moment.

3. The parliamentary resolution slapping a ban on oil transactions did not define transaction in detail. And that's what i exactly point out in my piece, if the executive is to depend on high level legal gymnastics to defy parliamentary resolutions then it means such agreements are not stable and can be revoked any time there is change of government. And i would expect the oil companies to be concerned about this.

Comment by Kobina Aidoo on February 24, 2012 at 2:15

Mukalazi - I have a few clarifying questions:

1. What is the content of the agreement?

2: What mechanism, if any, does parliament have to stop such a transaction?

3. How narrowly does the parliamentary resolution define "transaction?" 


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