1. PRESENTATION TO JOURNALISTS AT ACME, KAMPALA ON 7 TH FEB 2012 By Shem Byakagaba Managing Consultant Lantern consult International Contacts: Mob. +256 772 433440 Email:shemb@lanternconsult.com

2. Presentation outline Introduction Constitutional provisions The National Oil and Gas Policy The Petroleum (Exploration, Development and Production) Bill 2011 Institutional arrangements Licensing The Oil (Refining, gas processing and conversion, transportation and storage) Bill 2011. General comments

3. 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. 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.

4. 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.

5. 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.

6. The national Oil and Gas Policy, (NOP) 2008 Article 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

7. NOP contd… 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

8. NOP contd.. The NOP provides for the following regulatory framework; Cabinet Ministry responsible for oil and Gas The Petroleum Authority of Uganda (PAU) National oil Company MDAs Civil society and Cultural institutions

9. The Petroleum (Exploration, development and Production) Bill 2011 The long Title provides inter alia; The Act 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

10. 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.

11. Petroleum rights S.5 provides that subject to Article 26 of the Constitution the entire property in, and the control of, petroleum in its natural condition in, on or under any land or waters in Uganda is vested in the government on behalf of the republic of Uganda. S.6 provides that petroleum activities in, on or under any land or waters in Uganda or subject to Ugandan jurisdiction shall not be conducted without an authorization, license, permit or approval issued in accordance with this Act.

12. Agreements with governments S.7 provides that government may enter into an agreement in the respect of the following matters; a) The grant of a license b) The conditions for granting or renewing a license c) The conduct by a person of petroleum activities on behalf of any person to whom a license may be granted. d) Any other matters incidental or connected with the above.

13. Institutional arrangements S.10 – 13 establish the directory of petroleum. S.14 -47 establish the Petroleum Authority of Uganda. S.48-52 establish the National Oil Company

14. Comments on institutions There is emphasis on the office of the Commissioner who is an appointee of the president. Ss.18 & 19 are contradictory, they provide for the independence of the Authority but subject it to the direction of the minister hence providing for political influence and possible manipulation. There are no sufficient details on the National Oil Company, i.e., shareholdership, directorship, functions, management and the nature of company.

15. Comments.. The separation in the mandates and functions between the minister, the directorate and the Authority is not well articulated hence a recipe for conflicts and/or duplication. There seems to be an inconvenient marriage between different legal regimes or jurisdictions.

16. Licensing The Bill in Ss. 55 – 168 provides for; Reconnaissance permits Petroleum exploration license and Petroleum production license Production permit

17. State participation and National Content Ss. 126-129 provide 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

18. Information and documentation All petroleum data generated under this Act shall be owned by the state except; a) Data acquired under reconnaissance permit or b) Data not generated under a cost recovery regime S.154 provides that all data submitted to the minister by a licensee shall be kept confidential….and shall not be disclosed to third parties by any party.

19. Payments Ss 156-161 provides for the following payments; Royalties on petroleum Annual fees (annual rental plus training and research) Signature bonus

20. The oil (Refining, Gas processing and conversion, transportation and storage) Bill 2011 This Bill provides for regulation of oil refining, gas processing and conversion, transportation and storage of petroleum and also establishes institutions for policy formulation and management. The Bill provides for licensing, health, safety and environment and state participation.

21. General issues There is need to distinguish between the licensing and the regulatory authorities to avoid mandate overlaps and possible conflict of interest. The two 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.

22. General contd. S.154 emphasizes confidentiality. How can it be reconciled with transparency requirements? How do third party actors get information to hold the system accountable? Other than the procedure under the Access to Information Act, there is no specific procedure for disclosure of information under this Bill. There is no provision for competitive bidding on licensing. Will PPDA Act apply?

23. Comments contd.. The role of parliament is conspicuously absent! Whereas the policy provides for the role of civil society and cultural institutions, the two Bills are silent. There is no provision for stabilization clauses. Will these be dealt with in the agreements? Best practice requires to have them regulated in the Act. It is hoped that the fiscal terms will be spelt out in a separate detailed Revenue Management law.

24. THANK YOU FOR YOUR ATTENTION DESTINY IS IN OUR HANDS GOD BLESS UGANDA!!!