In this newsletter, you will read about some of our activities implemented in the month of April 2015 including trainings on issues of oil and land rights for communities along the DRC-Uganda border, youth and their efforts to contribute on oil governance, engagements on the local content policy in the oil sector, our advocacy on electricity governance, engagements on oil and environment and others.
In this newsletter, you will understand and appreciate the local content provisions following reading our article explaining them. You will also read about AFIEGO's appeals to government to emulate Tanzania and make PSAs public and most importantly, you will be informed about the refinery-affected people's case transfer from the Kampala High court to the Masindi High court.
In this issue, you will read about Sustainable Energy for All: can investments through Uganda's Rural Electrification help the poor access clean and affordable energy?, Training to work in the oil sector: the delay to operationalize the local content policy is another frustration for Ugandans, AFIEGO's appeal to NEMA and Parliament to urgently pass the 2014 National Environment Bill into law, Will Karuma electricity become a reality? We would like to remind you that it is always a pleasure having you read The Energizer.AFIEGO NEWSLETTER FEBRUARY 2015
communique on government's selection of Rt global resources to build a refinery, 18th february 2015
Yesterday 18th February 2015, AFIEGO convened a meeting of partners at its offices in Kampala to discuss concerns surrounding the selection by the Government of the company to build the oil refinery in Hoima district. Ugandans will painfully recall that on 10th and 11th October 2011, the national Parliament was recalled from recess and spent two full days discussing the mismanagement in the country's oil sector. Among other things, the Parliament pointed out that the sector was being run based on outdated laws, the Production Sharing Agreements (PSAs) had unfair stabilization clauses, that there were no competent institutions to regulate the sector and manage oil business on behalf of the government and that some government ministers had engaged in bribery to favour some oil companies against others.
After the above discussions with determination to restore transparency in the sector, the Parliament made a number of recommendations for proper governance of the sector including resolutions stopping all oil transactions until new oil laws were put in place and for three ministers (the then Prime minister, the minister for Foreign Affairs and the Minister for Internal Affairs) to step aside to allow investigations.
Unfortunately, the government ignored the resolutions. As a result, in 2012, the government entered into an MoU with Tullow Oil effectively authorizing the sale of two thirds of oil assets in Uganda to CNOOC and Total at a price of $2.9 billion. In effect, the executive connived with the Companies against the Parliament.
The reasons given then by the executive to reject the recommendations of the Parliament were among others (1) that the Parliament had no powers over the executive, (2) that their resolutions were based on speculation and in bad faith and most importantly (3) that implementing the resolutions would delay oil production and in turn, increase the costs for oil operations in the country. Then, many Ugandans innocently believed the government. They did not know that these were acts of impunity and would continue to haunt the sector. It should be noted that nowhere in the world has any country succeeded in managing the oil sector for the common good through undermining institutions such as a Parliament.
Indeed, since the firm down in 2012, a process that was meant to commence oil production, Ugandans have been waiting for the oil production to commence in vain. Instead, they are being fed on endless deadline promises. We are waiting to see how a government that ignored the parliament will implement the upstream and the midstream laws that were put in place in 2013 for the benefit of the citizens. More so, the meeting noted that since 2006 to date, over $800 million dollars have been paid to the government by the oil companies in Signature Bonuses and Capital Gains Tax but there is no information in the public domain on how such revenues are being used. Why is that oil money?
After discussing the current state of affairs in the sector, the meeting made the following observations:
• That using terms such as "preferred" bidder versus "alternate" bidder means that at the moment, there is no absolute winner or loser. The net effect of such terms is to confuse Ugandans. The meeting noted that the selection of an investor for the refinery was long overdue. It is an important step in our struggle to commence production of our oil. Unfortunately, the long time taken was never used to ensure openness and transparency in the process. The partners further observed that the statement by the Permanent Secretary MEMD that if the government fails to agree with the RT Global Resources (preferred bidder) on the final details, they would exercise a second option of going back to discuss with the alternate bidder (SK Engineering and Construction) is a fertile ground for corruption. It means that at the moment, both companies still stand a chance to win. This may encourage them to pay bribes to the usual middle men in order to out-compete each other for the project.
• Lack of production licenses: Today, Ugandans know that it is only CNOOC that has a production license. Total and Tullow Oil have no licenses for their two thirds stake. It is also clear that the government and companies haven't made a Final Investment Decision (FID) due to the absence of licenses and failure to reach a consensus on key issues including the final details regarding a refinery. And practically, there is no way the government can commence the building of a refinery without or without the RT Global Resources in absence of a FID. So, don't fool Ugandans. Perhaps, this is the reason why the government chose to use vague terms such as "preferred vs alternate bidders" which means that they also know that there is no final agreement yet. Indeed, the government cannot announce an absolute winner of a refinery at a time when it is still failing to conclude decisions with the companies that have invested heavily in the discovery of oil. Ugandans as owners of this country deserve to know why the government is taking long to issue licenses and how it expects to build a refinery without a FID. Remember, in 2011, the same government rejected Parliamentary resolutions allegedly to avoid delays but now they are caught in their own game. Ugandans want the truth. Otherwise, deceit will continue to endanger our oil and our country and we may not survive the oil curse.
• The meeting also noted that whether we build a refinery and an export pipeline, or one of the two, without transparency, Ugandans will not benefit.
• That the government should disclose to Ugandans the selection criteria and the capacity of RT Global Resources to mobilize the required over $3 billion to build the refinery or indicate whether the government will take responsibility to borrow the funds for the company through guarantees. This is information is key to facilitate the citizens to participate, demand and monitor the oil sector.
• The meeting further observed that today, Russia is a in a financial crisis due to sanctions imposed on it by the European Union and USA for her alleged support of rebels in Ukraine. That such a country and her companies may find it difficult to successfully borrow from International Financial Institutions such as the World Bank and others to invest in a refinery. So, the government should assure Ugandans that the selection of the RT Global Resources did take into account all the necessary factors, national, regional and global that may affect our choices.
• They also observed that the information from the government to date, indicates that the production infrastructure in the country will require over $15 billion, an equivalent of three quarters of Uganda's GDP. The refinery is among the components of the production that may require the biggest part of the investment. Where is the evidence that the RT Global Resources has the capacity and credibility to mobilize such funds? We hope, it is will not be a case where you have the pigmies from which to choose the tallest person. It doesn't make sense.
• Further, that civil Society in Uganda are not pushing the government to ensure that all oil development decisions are done in the open and with maximum transparency. Slowly, they are accepting to be intimidated by the government. For the citizens, the majority are being preoccupied with the daily struggles of survival virtually with no time or stamina to demand and hold the government accountable. This is the greatest danger of our time. It is unfortunate that most of our fellow citizens have been reduced to begging due to corruption in government that deny them good services.
• They further noted that if China does not build the refinery, it may actually fail to take off for ever due to lack of consensus on the best development option. The decision to build a refinery and pipeline just for purposes of reaching a compromise between the oil companies and the government may in the short term allow the production to commence but it is a big risk. The truth is that, to date, both the government and the oil companies have failed to tell Ugandans with concrete evidence the best development option of the two choices. They want us to believe that a refinery and a pipeline can deliver the same social and economic benefits and tradeoffs. That can never be true. This could be the reason why only CNOOC –a Chinese company was given a license while the rest of the joint companies are still waiting to know their fate. Unfortunately, such approaches may end up creating unnecessary monopolies in our sector with all the associated risks. While we need investors, it should be noted that currently, many of the Chinese companies in Uganda are involved in several project scandals including the $8 billion Standard Gauge Railway. So, allowing such companies to build a monopoly in our oil sector is a big risk.
• More so, the meeting observed that it is possible that companies such as Total E & P, Tullow Oil and others are not interested in a refinery and are not willing to contribute any investment capital and expertise in the refinery project processes. That their position may be the reason why the government is delaying for years to issue them with production licenses. The strategy may be to compel them to accept to participate in the refinery. Unfortunately, running a project such as a refinery based on dishonest tactics rather than consensus cannot guarantee maximum benefits for the citizens.
In view of the above observations, the meeting made the following recommendations for action by the government and other stakeholders in order to maximize the oil benefits for the citizens:
i. Conduct the bidding and all contractual processes for the refinery, pipeline and other oil projects in the open to show the citizens that you are committed to effective transparency.
ii. Make public the criteria and results for the selection and determination of the preferred bidder for the building of the refinery.
iii. Conduct a feasibility study to determine the value for money for investing in two development options as compared to using one option of a refinery or an export pipeline. This should be done before the commencement of any of the projects.
iv. Prepare and put in place a comprehensive medium and long term oil development master plan indicating the total land required for all the oil and other related projects. The master plan should also include how many people are likely to be affected, the routes for all pipelines, how much money is required to compensate the affected people and identify the safe areas to relocate vulnerable communities. This will help the government to plan for land acquisitions in time to reduce negative impacts on the affected communities.
v. The Parliament should use her oversight powers to review and monitor all the oil development processes by the executive before they are signed as contracts to avoid unfair transactions that have continued to undermine all Uganda's big projects.
vi. Urgently, establish and operationalize the Oil Authority of Uganda (OAU) and the National Oil Company (NOC) to ensure effective oil regulation and oil business management in the country.
vii. Urgently, put in place the upstream and midstream regulations for effective implementation and enforcement of the 2013 new oil laws.
viii. Amend the oil laws to legally constitute a national multi-stakeholder group comprised of eminent persons from the government, cultural institutions, religious institutions, elders, civil society and other relevant groups to monitor the operations in the oil sector including contracts, collection and use of oil revenues.
ix. To Ugandans, the Constitution gives you the powers; use it to participate and hold the government and all other actors accountable in the management of the oil sector as a means to shield the sector from current rampant corruption for the benefit of all citizens.
x. To the youth, you are the most energetic segment of the population and most educated, use your numbers, skills and energy to ensure that there is transparency in the management of the oil sector. This way, the oil will generate the necessary revenues to create opportunities such as jobs, quality education, health, clean water, affordable and reliable electricity, roads and others which will reduce your current misery.
xi. To NEMA, urgently, complete the review of the environmental laws to ensure effective environmental conservation amidst oil production activities.
xii. To UWA, urgently, work with the government to put in place strict guidelines for oil operations in the protected areas.
xiii. Lastly but most importantly, urgently, compensate and resettle all the refinery project affected people of Kabaale as a measure to secure the land for the commencement of oil production.
For God and My Country.
Signed by: Africa Institute for Energy Governance (AFIEGO), Centre for Constitutional Governance (CCG), National Association for Professional Environmentalists (NAPE), Ecological Christian Organisation (ECO), Pro - biodiversity Conservationists in Uganda (PROBICOU), Lake Albert Children and Women Advocacy and Development Association, BIRUDA, BUCAWA, Kakindo Orphans, KWATANISA, Women and Youth Associations of Butimba, Kidoma, Kinogozi, Kabaale, Mbiko, Komamboga, Makerere, Mukono, Kyambogo, Nkumba, Bugema and Kigumba.
Contact :Patience Akumu,
Communique issued 30th January 2015
Introduction :The Africa Institute for Energy Governance (AFIEGO) in partnership with Refinery Affected Residents Association organized a half day meeting with the refinery affected people of Kabaale parish, Buseruka sub-county Hoima District. The meeting was organized under the theme: Understanding the nature of compensation from government and the need to defend your property rights. It brought together over 30 refinery affected residents' whose case that was filed in the High Court and is still waiting for determination. The main objective of the case is to compel the government to stop forcing the affected people from accepting and signing for inadequate and unfair compensation and resettle those who asked for land within a period of three months.The objective of the meeting was to discuss the emerging issues in the communities and update the residents on the progress of the case. The meeting followed a visit by officials from the Ministry of Enery and Mineral Development (MEMD) and Strategic Friends International (SFI) - the company working with MEMD to implement the Resettlement Action Plan for the oil refinery which includes compensating the affected people. Following the visit, it was reported in the media that the people who had filed the case had changed their mind and were now willingly signing the compensation documents to receive the money that they had originally rejected.The stories created an impression that the affected people were no longer interested in the case. It is in response to the above stories that AFIEGO and partners organized the meeting in the affected villages to share with the people.
In the meeting, the affected people indicated that the MEMD and SFI were in Kabaale five days ago telling people that they were being given the last chance to sign and get compensation. That if they didn't sign, they would be evicted without compensation after all their case had been dismissed. They also indicated that 2 members had signed on the compensation documents due to unbearable suffering. Their kids had spent over two and half years without going to school, their grass thatched houses had collapsed and many other problems.
In response, AFIEGO lawyers explained to the residents that the case against government was in court for determination and they were working hard to get a new hearing date. The participants were encouraged not to be bullied into signing for unfair compensation but to keep strong and wait for court decision. From the deliberations the participants made the following observations:
1. The government of Uganda is taking advantage of their desperate sorry state, to trick or force the participants to sign for unfair and inadequate compensation which they had earlier protested as a violation of their constitutional right to prompt payment of fair and adequate compensation.
2. The participants observed that it has been more than two years of suffering and uncertainty since the cutoff date in June 2012 when government stopped them from using their land. The people have since not been able to conduct any form of development, including cultivation of perennial crops, depriving them of livelihoods.
3. Further still only two people among those that filed a case against government signed for the unfair and inadequate compensation but this does not mean that the constitutional violations had been addressed. In any case, the people signed not because they liked the compensation but because of suffering.
4. Government is using isolation and misery to force the affected people into signing agreements that violate their rights: The participants observed that even those who signed only did so to save their lives. What some people want now is to minimize the damage by accepting anything from the government to struggle and start a new life.
5. Physical and psychological suffering :Participants noted that those who had rejected the inadequate compensation as well as the ones who opted for resettlement have been isolated and live in bushes .They do not have access to basics like clean water, health centres, schools and markets.
6. Schools turned into police stations: It was observed that the only two primary schools at Nyahira and Kyapaloni in Kabaale had been turned into police stations for the last two months. This ended the little hope they had that the government would rethink and improve the education for their children. They observed that the government was no longer considering them as citizens.
7. Affected people still committed to soldier on in court: Participants emphasized that they are still in court and committed to soldier on until they get justice. They are ready to pay the cost. They are confident that court will give them justice and will protect them from further violations.
8. The participants noted that the move by MEMD and SFI to take the advantage of people's misery and suffering to force them into signing on the agreements that violate the right to prompt, fair and adequate compensation is absurd and unfortunate. It is an assault on the Constitution and every good Ugandan should fight it. That evil will never prevail against right.
After the discussion and appreciation of the challenges affecting the refinery people, the participants made the following recommendations for action:
1. The government of Uganda should respect the rights of the refinery affected people to prompt payment, fair and adequate compensation by immediately compensating them at a prevailing market value for their land and crops and resettle those who asked for relocation.
2. The High Court of Uganda should determine the refinery affected people's case expeditiously because justice delayed is justice denied.
3. Respect for court process: the government/MEMD and SFI should respect the court process by avoiding issuing of statements in the press that people had abandoned the case.
4. The Government should drop the plan to amend Article 26 of the Constitution or any other plan that has an effect of undermining the rights of Ugandans. Similarly the proposed amendment should be rejected by Ugandans as will increase the violations to property rights in the country. Since it is because of the case that now the government wants to amend the Constitution to give herself powers to exercise the powers of compulsory acquisition before payment of fair and adequate compensation.
We shall continue to be at the fore front of defending respect for human rights, and stand with the refinery and other affected communities until they get justice. We appeal to the courts to ensure that cases of human rights are given priority in hearing because they are the core of human dignity.
1. Dickens Kamugisha, AFIEGO
2.Kiwedde Geofrey ,chairperson Refinery Affected Residents Association
In this issue, you will read about our work to strengthen youth leadership to promote transparency and accountability in Uganda's oil sector, how government is taking advantage of the suffering and frustration of the refinery affected people to force them into signing for low compensation, our campaign against the proposal to amend Article 26 of the Constitution that will empower government to compulsorily acquire property before payment of adequate compensation, our gender mainstreaming campaign and how Women's lives can be improved through more informed energy-sector interventions drawing on a gender approach. We would like to remind you that it is always a pleasure having you read The Energizer.AFIEGO Newsletter January 2015.AFIEGO Newsletter January 2015
communique by the youth, 29th january 2015.
In the months of November and December 2014 and, January 2015, AFIEGO and youth leaders from different parts of Uganda organized five workshops in the districts of Buliisa, Hoima, Kampala and the Universities of Makerere and Kyambogo. They also held various meetings with guild presidents and their officials from 8 universities. In total, over 877 people participated from 13 universities, 21 local governments, 6 religious and 3 cultural institutions, 9 youth associations and other groups. The workshops focused on the ongoing oil production development processes in the country. Our core objective was to help the participants especially the youth leaders to appreciate the critical areas of decision making regarding the oil production processes as a means to empower them mobilize the rest of the public to demand for transparency in the oil development processes.
The workshops were in response tothe delays surrounding the production of Uganda's oil. It should be noted that since the discovery of oil in 2006, several promises have been made by the government and companies on the time when Ugandans should expect to start enjoying the oil revenues and other related opportunities that come with production. Unfortunately, to date, the citizens are still waiting and no one is coming out to explain why. For example, the Early Production Scheme (EPS) that was promised in 2008 did not materialise and some Ugandans are still waiting. Then, in 2011, a promise for a full refinery was made; again, we haven't seen anything. All these are making Ugandans anxious. They are waiting for oil to address their problems. Amidst the delays, unemployment, quality of education and school dropouts, health and other services are worsening. So, the workshops and meetings were intended to enable the youth to discuss and make recommendations for action.
At all the workshops, presentations were made on 3 key questions;
• First, why is Uganda taking too long to commence oil production?
• Second, who is responsible for the delays and who benefits or loses as a result of the delays?
• Third, why is the government not mobilizing and working with the citizens to maximize the oil benefits for the common good?
The presentations and discussions of the above questions helped the participants especially the youth to recognize with gratitude the positive progress made in Uganda's oil sector including the confirmation of over 6.5 billion barrels of oil reserves, the formulation of the 2008 Oil and Gas policy, the enactment of the Upstream, Midstream and Downstream oil laws, the appointment of the officials of the National Oil Company and Oil Authority of Uganda, the establishment of Kigumba Petroleum Institute and teaching of oil related courses in other Ugandan tertiary institutions as well as training of others in Universities abroad, the progress on the acquisition of land for the refinery, progress on putting in place a national local content policy, progress on looking for the refinery investor and many other developments. However, theyobserved that while there are many good things happening in the sector, there are also others going in the negative direction especially regarding lack of transparency regarding on oil production processes, use of oil revenues that were generated as Capital Gains Tax, land acquisition for the refinery and other ol activitiesas well as other human rights violations and environmental challenges.
Based on the above presentations and discussions, the participants made the following observations:
2. Observations by the participants
a. They observed that the connivance of the Government and Tullow Oil to disregard the Parliamentary resolutions of 2011 that led to the signing of the MoU between Tullow Oil, Total and CNOOC in 2012, is the reason why the government and companies are taking long to agree on how to manage the oil sector. They ignored the resolutions with the argument that it would delay the production but later, they were caught in their own game. Unfortunately, while the leaders and the companies are also affected by the costs of such impunity, the biggest victims are the citizens (the owners of the resources).
b. That the available evidence shows that in 2012 when Tullow Oil entered into a Memorandum of Understanding (MoU) with Total and CNOOC, Tullow committed to certain conditions and was sure that every decision by the companies and government would be happening within 6 months as per normal industrial practices. It was this confidence that made Tullow Oil to book all the farm down funds in its accounts as income. Unfortunately, the disagreements between the government and the companies regarding whether the best development option was a refinery or a pipeline or both lasted for over two years and nothing could move before settling the disagreement.
c. They further observed that while a consensus to build both a refinery and a pipeline was reached by the parties, it stills remains too costly for Uganda to produce her oil using two expensive options. That under the MoU between Tullow, CNOOC and Total, Tullow Oil had a Special Responsibility to ensure that everything happens as per the MoU. But when the delays continued as a result of the disagreements regarding the best development option, Total and CNOOC decided not to pay the farm down balance to Tullow As a result, Tullow Oil has had to write down over $500 million as income not earned. This may scare away potential investors.
d. That both the companies and the government should appreciate that time is money and as such, they should do everything possible to follow industrial practice.
e. Further, that there is need for the government and companies to agree on the Production Licenses (PL) in order to move forward. Companies do not have the PLs for Blocks 1 and 2 at the moment. Only CNOOC has a PL for Kingfisher
f. That without production licenses for all the blocks, it may be difficult to make a Final Investment Decision (FID), a decision that must in place before the commencement of oil production. That while the introduction of a number of taxes on the ongoing oil transactions by the government is good and has already increased our revenue collections to fund over 80% of our budget, most of the said taxes such as VAT, the import tax, the withholding tax and others are taxes on oil investments rather than profits. That while such taxes are good for a poor country like Uganda, they have the potential to delay production and increase the recoverable amounts because they make the sector operations too expensive.
g. That while it is okay to build a refinery and an export pipeline or an export pipeline alone, the oil market realties cannot allow Uganda to rely on a refinery alone. And now that the crude oil prices are below a $60 mark, it even makes things more complicated for the country.
h. That in the event that the companies such as Total and CNOOC refuse to fund a refinery, the government may be compelled to give guarantees to private companies to secure funds for building of a refinery and if the refinery fails to make profits, it will be Ugandans to lose through taxes
i. They further observed that the whole production infrastructure will require around $15 billion and this is almost ¾ of Uganda's current GDP. And they wondered which International Financial Institutions (IFIs) will be willing to invest in such a project when there is no transparency and some things such as the final investment decision are not yet in place?
j. That unlike Ghana which has access to the ocean and her oil is off shore, Uganda is a land locked country and her oil is on land, and, as such, it must contend with all the challenges of land acquisition and community issues which make the production process even more costly in terms of money to invest and time to settle issues with communities.
k. It was further observed that the evidence available indicates that to date, the oil companies in Uganda still do not believe the refinery as the best development option for Uganda. It appears that the government has failed to convince the companies about the value for money regarding the need for a refinery. These disagreements may continue to undermine the country's capacity to maximize the oil benefits.
l. They were concerned that the government is not doing much to create effective create public awareness on the recently passed revenue management Act that shades light on the sharing of oil revenues between the central government, local governments and the communities.
m. There is still a lot of endemic poverty and unemployment which dis-empowers the youth and all the citizens from effectively influencing the oil sector development processes effectively. This is a big challenge as it increases mistrust and suspicion between the government and the people.
n. It was further observed that the local communities have continued to lose their land to oil investors and land grabbers. Instead of the government to protect the affected communities, it is in the process of presenting a proposal to parliament to amend Article 26 of the Constitution to the effect that Government has powers to compulsorily acquire someone's property before payment of a fair and adequate compensation. The participants warned that if such proposal is effected, it will be the beginning of the oil curse in Uganda. Many Ugandans will become landless and may fight back, hence conflict.
o. That there are no indications that the decisions regarding the refinery or a pipeline are taking into account the challenges of climate change and its impact on ecosystems. To date, Ugandans do not know the environmental and human rights trade-offs they must prepare to make if a refinery is built compared to a pipeline. Government is not providing such information to the citizens. For example, the government displaced over 7000 people from the 29sq km of land in Kabaale Hoima before conducting a Social and Environmental Impact Assessment. As a result, for close to three years, the government is still failing to resettle all the affected households.
p. That generally, the oil sector is suffering from lack of transparency and this is the reason why mistrust and suspicion in the country is worsening. Indeed, other than the executive, all other institutions including the parliament, in real sense, remain stakeholders of facade.
In view of the above presentations, discussions and observations, the participants from all the workshops and meetings made the following recommendations for action:
3. Workshop Recommendations
i. Do not amend Article 26 of the Constitution: While the existence of Article 26 of the Constitution that provides for the right to property and protection against property deprivation has not been very successful in shielding Ugandans especially the local communities from the injustice of unfair, inadequate and delayed compensation and, land grabbing, the proposed amendment whose net effect is to legalize the injustice, will worsen the situation. We call upon the government to avoid such draconian laws for the good of our country.
ii. Organize a national stakeholder conference on the best development option for Uganda: In order to reduce the expectations and anxiety amongUgandans, the government should urgently organize a meeting of all relevant stakeholders and present evidence supporting the decisions of building both a refinery and a pipeline. They should also use the same meeting to explain why there are endless delays in the oil development processes. What are the social, economic and environmental gains or tradeoffs of each development option that Ugandans should prepare for?
iii. Transparency: The government should ensure that there is maximum transparency in the entire production process including decisions regarding assessing the field development plans, issuance of production licenses, making of the final investment decisions and others. Transparency will build confidence and trust in all actors and most importantly, allow government institutions to operate with efficiency.
iv. Respect the Parliament: No oil producing country has ever succeeded without an effective parliament that is strong enough to make laws and use its oversight powers to ensure that such laws are implemented and enforced by the executive based on the principles of a free and democratic society. The parliament in Uganda is lacking in great detail. It is driven by the executive and this is costing the country heavily. The dignity and sanctity of our parliament should be restored to enable it play her legislative and oversight roles.
v. Build civic competence of the citizens: A country is as strong as its own citizens. Since independence, Ugandans have gone through decades of torture and repression to the extent that they perceive every government as too dangerous to question or even engage. Further, most Ugandans still live in poverty with many immediate problems such as lack of food, paraffin, soap and others .These immediate problems have continued to make it hard for them to participate in public affairs. However, it will be in the best interest of the country for the government to strengthen and empower the citizens to overcome the obstacles that hinder them from participating in public affairs, especially, issues of oil.
vi. Empower the youth to benefit from the oil sector: In the last 7 years or so, the youth in Africa have continued to grow in numbers amidst decreasing opportunities. As a result of their numbers, they have been key in influencing governance processes across the continent. For example, in countries such as Tunisia, Egypt, Libya and others, the youth played a big role in the overthrow of governments because they felt that those governments were denying them opportunities. We therefore recommend that the government of Uganda should urgently empower the youth and ensure that they benefit from the oil sector. This will ensure peace and stability in the country now and in the years to come
vii. Disclose how the oil revenues are being collected and spent: While oil production has not commenced, we know the government has so far received oil revenues of over $800 million in Capital Gains Tax and licenses. But to date, Ugandans do not do know how that money was used. Failure to disclose such information regarding the little revenues so far collected clearly indicates that upon production, the huge revenues may be misused at the expense of the citizens.
4. Conclusion: The oil sector in Uganda is at a critical stage. We have confirmed reserves of 6.5 billion and the production of these reserves can generate national revenues of over $3 billion per year for the next 30 to 40 years. If we add the above $3 billion on the current $4 billion revenue collections per year that we get from other sector, then, you have a total of $7 billion per year. While this is not a lot of money considering Uganda's population of over 33 million, it is a significant increase that if we invest it in productive areas, its impact can be huge. We can create more jobs, strengthen the education and healthy sectors, provide clean water to every Ugandan, improve agriculture and make many other developments. But if we don't manage the sector well, the negative impacts can undermine even what we already have. It happened in Nigeria, Sudan and many others and, it can happen in Uganda.
For God and Our Country
communique issued by afiego and partner ngos/cbos from the bunyoro sub region at the end of three stakeholder consultative workshops to discuss the process for the procurement of a company to build the oil refinery and to collect views for a private members bill entitled “the right to fair compensation and transparency in land acquisition, rehabilitation and resettlement law, held in bugambe, biso and kiziranfumbi- sub counties of hoima and buliisa districts, between 12th and 14th august 2014
The Africa Institute for Energy Governance (AFIEGO) in partnership with other civil society organizations from the Bunyoro Kingdom including World Voices Uganda, Empagi Zabunyoro, the Bunyoro Youth Forum on Oil, the Green Organization, the Africa Challenge Foundation, the Kyambogo Students Environmental Association, the Kibaale Girl Guides Initiative, the Refinery Residents Association, the Grafen of Butimba and Wambabya, the Kinogozi Womens Association and other community organizations organized 3 seminars at Bugambe, Biso and Kiziranfumbi sub counties to empower the communities on the contractual process for the oil refinery and the process for enacting a new law on compensation to repeal the current Land Acquisition Act of 1965 in order to protect people’s property rights as provided for under Uganda’s Constitution and ensure transparency in the oil sector. The 3 seminars brought together over 178 participants comprising of local leaders, land owners, community elders, CBO leaders, religious leaders, cultural leaders, primary and secondary school teachers and other stakeholders from the region.
At the seminars, the participants were guided through various oil and other related laws and policies regarding the management of oil, human and property rights. The participants were also trained on the legislative powers of Parliament and District Local Councils and how the participants can influence them to enforce the laws. Procurement of a company to build the oil refinery was also covered.
Specifically, the seminars covered 5 key issues; the land question in Bunyoro, the oil refinery development procurement process and its impacts on human/property rights and revenue transparency, lack of transparency in compensation and procurement, poor enforcement of laws and the delay in passing the Revenue Management Bill 2012 into law. At the end of the seminars, the participants identified several gaps in the entire oil development process and made a number of observations and recommendations for action as follows:
1. Outdated laws: The current Land Acquisition Act of 1965 is outdated and does not measure up to Article 26 of the Constitution in as far as the protection of property and human rights are concerned. The situation has been made worse by the failure of the minister for lands to put in place regulations for the assessment and payment of compensation as required by section 20 of the above Act to guide both the central (the Chief Government Valuer) and the District Land Boards (DLBs) to ensure that the rates of compensation they prepare especially for crops and buildings of none permanent nature under section 59 of the Land Act 1998 comply with the dictates of the Constitution. The participants observed that the above failures have contributed greatly to the grabbing of poor people and local communities’ land in the name of development. In cases where the government has tried to compensate the victims, lack of regulations have made it difficult to ensure that such compensation is both prompt and adequate.
2. Failure to enforce the new oil laws: While we welcome the new upstream and midstream laws of 2013 which have some good provisions to promote good oil governance in Uganda, there are no signs that these laws will be implemented to stop the problems of poor compensation and land grabbing. To make it worse, the government is delaying and or failing to publicize the laws to enable the citizens especially the local communities and the affected people to appreciate how to use the laws to demand for accountability and defend their rights.
3. Secrecy in bidding processes and evaluation of the bids: We understand that by the end of this year 2014, the government of Uganda will select a company to build and operate a 60,000bd oil refinery. The selection will be made from the two companies namely “South Korea's SK Energy Company and Russia's RT-Global Resources”. While we commend such government’s efforts to exploit our oil through value addition, the secrecy surrounding the process is unfortunate and a betrayal to Ugandans who had hoped that the new oil laws would ensure that all oil development processes in Uganda would be open and transparent. Secrecy defeats the principles of good governance of transparency, accountability and public participation that would mobilize the public to ensure that we get the right companies to drive our sector for the common good. We believe that while openness and transparency may not be a sine qua non for responsible use of oil revenues, lack of it provides a huge fertile ground for corruption by both the companies and government. Secrecy is an evil and should be avoided.
4. Disagreements between the government and the joint ventures regarding the refinery to process oil against the pipeline to export crude: While over 7,000 people of Kabaale-Hoima district have been displaced and 29sqkm of land secured for the refinery, we are concerned that to date, there is no consensus between the government and the Joint Ventures especially Total E & P and Tullow Oil on both the refinery and the pipeline will be management. Instead, the information available indicate that the current oil companies in Uganda are only willing to contribute money to build the pipeline and not the refinery. To make it worse, there is no evidence to show that any of the two final refinery bidders (South Korea's SK Energy Company and Russia's RT-Global Resources) from which the government of Uganda will select the company to build and operate the refinery has its own money or capacity to borrow enough money to build the refinery. This means that any of those companies will require government guarantees in order to borrow funds from international financial institutions to build the refinery. If this happens, it will be the beginning of an oil curse in Uganda as there will be no pressure on such private companies to make the refinery economically viable to pay back the loans. Whether the refinery makes profits or not, Uganda’s tax payers like us will have to pay the loans.
5. Deliberate payment of Billions of shillings to non existing companies: We note with grave concern that our country is now confronted by a situation where those in leadership are conniving with investors against the citizens. It is sad that even before oil revenues begin to trickle in, we are already seeing billions of shillings being paid to non existing companies. These are hard times and we call upon our fellow citizens to stand up and demand for accountability in order to promote the common good.
6. Weak parliament: The failure by parliament to use her oversight powers to prevail and ensure that the government delivers services to the citizens has continued to render the good laws and development projects irrelevant to the citizens and there is no guarantee that the oil sector will be any different without meaningful reforms.
7. Local communities most affected: In all Africa’s oil producing countries, it’s the local communities that have continued to suffer the worst oil impacts due to poor governance in form of weak institutions and autocracy of leaders.
8. Failure to balance laws, contracts and politics: The existing oil laws including the 2013 upstream and midstream lack clear legal sanctions against bribery, abuse of office and dereliction of duty. The laws also put most of the powers in the executive who continue to use such powers to mix political interests with contracts.
9. The problem of confidentiality of oil contracts: while we appreciate and observe that historically, contracts have been confidential, the world is now moving at a high speed towards disclosure and such disclosure come with many benefits. Making contracts public ensures the integrity of the bidding and negotiations and allows for parliament and the public to own and ensure contracts are enforced and payments made. It therefore gives such contracts the necessary political legitimacy.
10. Lack of publication of contracts: We observe that as a general principle, Ugandan laws do allow confidentiality clauses in the contracts. Experience shows that countries such as Nigeria, Egypt and others used to have confidentiality clauses but it became costly and since then, they have decided to publish all of their oil contracts. In Nigeria, the bids received are also published. Any exception to the disclosure requirements must be very strictly and narrowly drawn. On the other hand, in Sao Tome, the law rejects all confidentiality except for “proprietary Industrial property rights/ intellectual property rights.” More so, the Sao Tome’s law requires disclosure by both the government and the investors and disclosure obligation is a contractual requirement in the license and production sharing agreements.
11. Corruption in public procurement: We observe that this area is the most prone to corruption. At the moment, Uganda lacks laws that can compel all material contracts to be subject to open competitive public procurement. In Sao Tome, any contract is void unless entered pursuant to competitive provisions as required by law.
a). We need a credible company, from a democratic country chosen through an open and competitive process: Considering the social, economic, environmental and political significance of an oil refinery, we call upon the government to ensure that we get a credible investor. This means that the contract to build and operate Uganda’s oil refinery should be given to a right kind of company from a democratic country, even if the financial terms by that company are not the highest. For instance, a company that has a very good environmental record or human rights record or training program or type of technology or local content fitted to Uganda’s oil fields should get the contract. It is therefore necessary that the entire bidding process of selecting the final bidder out of all the six companies which had showed interest in the refinery should be done in the open. The process to select the South Korea's SK Energy Company or the Russia's RT-Global Resources as the company to be given the contract should be subjected to effective public hearings from different stakeholders. And the democratic, rule of law and constitutional credentials of home government of the respective companies should also be a key factor to consider in determining the final company to build the refinery.
b). No government guarantees to private companies to secure loans for the refinery: The government of Uganda should not give any guarantees to any private company contracted to build the refinery. The company should have its own money or capacity to borrow without any government guarantees. This will help our country avoid possibilities of contracting companies that do not have investment capital.
c). Any contract signed with the company should guarantee a large and fair share of profits to the government which increases as oil prices rise.
d). Under the refinery contract, Uganda as a sovereign state should maintain a satisfactory degree of control over all the operations.
e). An independent national oil disputes tribunal should be established to deal with all oil related disputes in the country and minimize arbitrations abroad.
f). The National Oil Company (NOC) and the Oil Authority of Uganda (OAU) should be empowered and supported to effectively safeguard the business interests of the government and ensure strong oil regulation in the country. Now that the officials of the two institutions above have been appointed, they should take responsibility in overseeing the refinery and other oil development processes.
g). All contracts, licenses and MoUs regarding oil development in Uganda should be public documents except only the parts containing intellectual rights.
h) Any officer or government and her agencies suspected of corruption, bribery or any mischief in oil or any other related developments should immediately step aside until investigations are done and completed.
i). We need a new law on compensation to protect the human and property rights of the poor and vulnerable local communities: The new law entitled “The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement” to repeal the current Land Acquisition Act of 1965 and to act as an enabling law for the enforcement of Article 26 of the Constitution 1995 as amended and other laws on property rights should be urgently enacted to stop or at least reduce the suffering of oil affected communities by guaranteeing the right to prompt and adequate compensation in all cases of land acquisition. In cases of land acquisition, the land to be taken should be the absolute minimum determined through a Social Impact Assessment and the proposed development on the land should take off within not more than one year from the date of acquisition.
In conclusion, the participants thanked AFIEGO for organizing the seminars and providing legal guidance to the participants. The participants recommitted to continue working together with AFIEGO to influence policies and ensure that every Ugandan benefits from the oil sector.