URN.UNOC’s Head of Contracts and Negotiations Barbara Nabuweke expressed worry that those companies and persons that have already got letters of appointment and contracts will lose out if the laws take long to become operational.
Oil companies and the business community want the President and Parliament to expedite the enactment of the laws that will govern the oil and gas industry.
Following the passing of the East African Crude Oil Pipeline (EACOP) Bill by parliament last week, there was excitement in the industry that finally, the regulation gives way for the pipeline project construction to commence.
The Bill provides for different aspects including local and national content, revenue sharing, taxation, and shareholding, among others.
However, the Bill is yet to get the President’s Assent, which investors hope, will be sooner rather than later so that the Final Investment Decision (FID) for the EACOP project is made.
Other pieces of legislation include the Public Finance Management (Amendment) Bill and the Income Tax Amendment Bill 2, which are expected to be debated and passed by parliament this week and await the Presidential Assent.
Barbara Nabuweke, the Head of Contracts and Negotiations at the Uganda National Oil Company (UNOC) says EACOP FID is due to be made by the end of this month so that preparations for construction works begin.
Tanzania has already completed the legislative process necessary for the project. She says delays will also delay the ability of the shareholders to get financing for the project to commence.
The EACOP Company is owned by Total Energies with a 62% shareholding, while Uganda and Tanzania governments own 15% each and the Chinese oil company, CNOOC 8%.
It is represented in Uganda by EACOP Uganda and in Tanzania by EACOP Tanzania which is its subsidiaries.
Several companies, local and international have already been in different agreements and others have formed partnerships regarding not only the pipeline but also the upstream developments.
The pipeline is vital for the commencement of oil production because the produced oil will have to be exported as soon as processed at the Central Processing Facility, hence the need to have the export pipeline ready.
Speaking at a dialogue organized by an advisory firm, PricewaterhouseCoopers to discuss the implications of the just passed EACOP Bill, Nabuweke expressed worry that those companies and persons that have already got letters of appointments and contracts will lose out if the laws take long to become operational.
The EACOP project is expected to create 150,000 direct and indirect jobs, with at least 57 percent of these reserved for Ugandans.
The pipeline alone is estimated to cost 3.5 billion dollars. However, unlike in the districts within the Albertine Graben, the people along the proposed oil pipeline root are yet to show readiness to take up the available opportunities, especially in health, agriculture, accommodation, and other areas.
Uganda Chamber of Mines and Petroleum has been mobilizing the private sector to get ready before the projects start, or they will lose out to bigger or foreign investors.
The Chamber’s Secretary-General, Aggrey Ashaba urged the people not to wait but insisted that standards will not be compromised even in the ring-fenced jobs.
Ugandan companies have been given chance by ring-fencing some of the works and supplies, especially where they cannot compete with the more capable foreign companies.
These are mainly services and supplies that can be sourced locally. The contracts are dubbed Tier 1 and Tier 2, which are usually given out by the companies contracted by the oil companies.
Some contacts were however already given out before the laws were made and these will remain out of the ring-fenced ones.
Uzamukunda Dorothy Manager Tax and Legal Services at PricewaterhouseCoopers say this is meant to ensure no further delays.
The Insurance Industry is among those ahead in preparations for these opportunities. The insurance companies have decided to come together and pool resources to raise their capacity to underwrite the usually big assets.
The companies have formed the Insurance Consortium for Oil and Gas, and all companies will have to negotiate policies through the consortium, not individually, according to Ronald Musoke, the Chief Executive Officer Uganda Reinsurance Company
The targeted classes of insurance are Construction, Third-Party Liabilities, and Marine Insurance.
He insisted that no local company will be allowed to ‘go it alone, but through the consortium, except for the asset classes in different areas.
The EACOP Bill has provided for a 10-year tax holiday for the company, meaning for all its income from the crude transportation tariffs, the company will not pay income tax for that period.
