Sam Jumbwike

Sam Jumbwike

Is Government Failing To Manage Ugandans’ Expectations From The Oil Resource?

Two years after announcing the discovery of commercial Oil Reserves in Uganda in 2006, the Government of Uganda came up with the National Oil and Gas Policy of 2008 through which it sought to utilize the newly found Oil resources to contribute to early achievement of poverty eradication and create lasting value to society.  

Oil raised the expectations of so many Ugandans as they started envisioning the petro-dollars that would flow into the country to fix the financial gaps that the country had been grappling with for generations.  Government’s remedy for managing these expectations was to have constructive dialogue with all the stakeholders in order to reduce anxieties arising from the expectations.

Ten years down the road, more oil deposits have been discovered and the recoverable oil now stands 1.5 billion barrels. Giant Oil Companies like Total, CNOOC and Tullow Oil entered into Uganda and have made huge investments in Uganda’s Oil Sector. Government has already reaped around USD $ 300,000 from Signature Bonuses and millions of dollars from taxes arising out of Tullow’s acquisition of Heritage’s interests in Uganda, and Tullow Oil’s farm down to CNOOC and Total.

Government’s potential share of the oil resource after oil companies have recouped their costs stands at a whopping US $50 billion and Government has already indicated it to Ugandans that Uganda will reach the Middle Income Status in the next decade.

However, from public opinions, Ugandans’ expectations from the Oil seem to be dwindling every other passing day.  A decade after discovery, the oil is yet to be drilled from the ground, the Oil refinery has not yet been set up and the pipeline to transport the crude oil is yet to be built. Earthfind’s Sam Jumbwike engaged a number of Ugandans about and they shared about their expectations from the Oil.

Mariat Nasasira-Radio Presenter, Galaxy FM

 

The truth is that I stopped expecting anything from this Government. I have zero hope in our Oil. Under different circumstances or different Government I would expect to see an improvement in infrastructure, better roads and hospitals, more jobs, reduced fuel prices and gas prices for those of us who use it to cook. And of course a reduction in the country's dependence on foreign donors. Unfortunately with the kind of corruption and poor governance in place, that seems like just a dream.

Maureen Kyalya Waluube- Former Presidential Candidate 2016

I expect nothing from the Oil as long as we still have NRM in Uganda. All profits are going to build Rwanda not Uganda

Fred Musisi Munagomba- Director, Creative Options

 

Actually, I don’t expect anything good to come out of the Oil resource because I don't trust the leadership. The oil money will be stolen and nobody will be apprehended.

Mutebe Henry-Ugandan Student in Norway

I want to be optimistic. I am hopeful that the oil money will change fortunes for Ugandans but this can only be achieved by more increased transparency, accountability and sound investment of the oil money. Countries that have done well like Norway invest about 60% of their oil money into equities in well developed markets like the US, UK/euro area, Germany, Japan among others. I would be very proud if our country had shares in companies like Apple, Microsoft and Nestle.

 

INTERVIEW: We Need More Engagements With Government - Petroleum Students

Anita Badagawa is a final year student of Petroleum Geosciences and Production at Makerere University. She currently represents the petroleum students as the President of the Makerere University (MUK) Society of Petroleum Engineers Student Chapter. She shared with EarthfindsSam Jumbwike their dream for the Oil and Gas Sector in Uganda

Tell more about the Makerere University Society of Petroleum Engineers/Students Chapter. How did it come about?

Society of Petroleum Engineers (SPE) MUK Student Chapter was basically created under the SPE Uganda Section to extend the arms and influence of the Society of Petroleum Engineers International (SPEI) in Petroleum Institute. The SPEI consists of 168, 000 members in 144 countries and about 368 Student Chapters worldwide. SPE membership includes more than 68, 000 student members.

Our Mission is to collect, disseminate, exchange technical knowledge concerning the exploration, development and production of Oil and Gas resources and related technologies for public benefit to both Students and Professionals.

On top of the above, the SPE Makerere Student Chapter aims to develop professional awareness among members and other Students doing degrees that are relevant to the Oil and Gas sector. We promote social and academic interaction among Geosciences and Engineering and promote unity among all engineering disciplines in conjunction with Geosciences Students’ Societies.

As of now, what are some of the things that you have undertaken as an association to fulfill your objectives?

We have organized recruitment drives to enroll more student members. We have had collaborative projects with Makerere Engineering Society, held distinguished lectures from Petroleum Engineering Professionals, built models for study purposes, sensitized people, undertaken trips to attend conferences on Oil and Gas in leading Oil Companies across the globe, and we recently organized the Oil and Gas forum that took place at Protea Hotel.

Petroleum Geosciences and Production is relatively new in Uganda. Where did your lecturers come from?

Yes it is true it is a new course, however we have had the Geology Department for a longer time and since half of our curriculum as petroleum students consists of geology related course units, lecturers to handle that were available.  

Now for the rest of the curriculum, we have had visiting lecturers of Petroleum Engineering from Oil Companies like Total, CNOOC, Tullow Oil Uganda and also government technocrats from the Directorate of Petroleum at the Ministry of Energy and Mineral Development.

Can you sum up what Petroleum Students at MUK are taught for the entire course?

Throughout the course we study Petroleum Engineering, Drilling Engineering, Health and Safety, Reservoir Engineering, Geology, Drilling Fluids and Geo-Physics among others.

What are some of the challenges that you face as Petroleum Students?

There is inadequate exposure while undertaking the course mostly due to lack of instrumentation and equipment in laboratories. For instance we study quite a number of things that require hands on exposure and experience; however it is nearer to impossible to have an opportunity to learn with practice.

The software to work with is inadequate. Most of the data we deal with has to be worked on using licensed software that is only available in big Oil Companies abroad and rare to find here. There is also less communication from government concerning the Oil Sector.

Is this having an effect on your competitiveness?

Yes it is. There are few Petroleum Engineers that have studied in Uganda that can actually compete with the ones that have studied for example at Heriot Watt University. This is affecting us in that most of the operating companies are hiring expatriates to do the engineering work available.

We are not having enough practice to be in position to compete with the expatriates that are being brought into the country to do the engineering works in the Oil and Gas operations.

What advice do you have for government if we are to do better?

Government must beef up local capacity in the Oil and Gas Sector. All Oil and Gas Faculties at Universities and Institutes in Uganda should be furnished with efficient laboratories and enough equipment like Microscopes for Christolographical studies, Thin Sectioning Equipment, and Geo-Physical Equipment.

Also Oil and Gas Students should have enough study trips and be availed with the best Lecturers in the Petroleum Industry. The 6.5 billion barrels of Oil in place with about 1.5 billion barrels recoverable is good news to the economy of Uganda.

The revenues from the Oil industry will boost development in almost all the other sectors and this will place Uganda at a better chance of becoming a middle income country. The current Oil and Gas Regulations are good; they just need a lot more professional people to implement them in order to enable sustainable Management of Uganda’s Oil Resource.

From what we have studied, we have a lot to offer to our country in terms of building the Oil and Gas industry through proper regulations, good policy, good management to ensure that the Oil Resource is not misused in order to avoid the Oil Curse and above all ensuring that the Oil will benefit every Ugandan.

New Energy Ministry PS Calls For Holistic Natural Resources Development

The new permanent secretary (PS) in the Ministry of Energy and Mineral Development, Dr Steven has appealed to Ugandans to desist from focusing on only the negative side of the Energy Sector in Uganda but instead begin engaging on the positive side of what their country can do.

This appeal was made during a Conference that the Ministry of Energy and Mineral Development had organized for Editors of Various Media Houses in Uganda to update them about the developments in the Oil and Gas Sector at Hotel Africana.

“The current Government faces a big problem. A lot of work has been done, but much of it has not been reported about. The Media likes looking at the bad side of the story only and neglects the positive side. We need t o begin exposing our Country in a good way, and we should not focus on Oil alone, but all resources.” appealed Dr Isabalijja.

He also made a commitment that under his tenure,  the Ministry of Energy  and Mineral Development will be availing Ugandans with all the necessary Information about the Energy Sector in Uganda and that journalists should take more interest in sourcing for this information and passing it onto the masses.

  “The Ministry has a lot of work but journalists are not seeking for information on what is being done. The media plays a pivotal role in society, because they have the platform to educate the masses and at the same time disseminate the information which the Public may not have. My personal belief is that as a ministry, we should have closer engagements with the media; they shouldn’t look at us with suspicion.

About three years ago, we had issues with the oil agreements, whether they would be shared or not, I believe we should not have this disengagement again. A lot of work has been done in the Oil and Gas Sector, and more is to be done, but because people know little of what is happening, you will find everybody in society asking, what happened? What is this? Why that?

I am not a politician, but most of us have mainly focused on what went wrong and not engaged on what we can do. The resources are many in Uganda, but we are not seeing them because no one is reporting about them.  That story of “what can we do” is not being told and it is what I now want to hear. “ Added Dr Isabalijja

Oil and Gas: East African Countries Must Protect Local Businesses

Neema Lugangira (in photo above) is the Head of Policy at the Southern Agricultural Growth Corridor of Tanzania. She is the Former Ag. Director for Local Content in Investments, National Economic Empowerment Council in the Prime Minister’s Office in Tanzania

Prior to joining the Prime Minister’s office, she was the Senior Supplies Officer (Local Content) at the Ministry of Energy and Minerals. She also worked as a Senior Supply Chain Consultant (Local Content) at the famed Norwegian Oil Company Statoil.  She caught up with Earthfinds’ Sam Jumbwike and shared why East African Countries must amplify the Local Content Agenda if they are to benefit from their resources.

Tanzania is famed for being strict when it comes to Local Content policies, how did you manage to move ahead of the other East African Countries on this path?

I initiated the local content agenda in Tanzania about 5 years ago. It was part of my MBA thesis where I focused on how to increase Local Participation in the Oil and Gas sector. As a result of that, my research was found to be of great importance and it was recommended that it should be published into a book and I published it in 2014. It was distributed so that it could add to the Local Content development knowledge agenda.

After doing my research and returning to Tanzania, I got an opportunity to work at Statoil, a Norwegian Oil Company where I was responsible for Local Content. But while there, since I was continuing to push for Tanzania to have a local content policy, the Government of Tanzania through the Ministry of Energy and Minerals decided that we should start drafting the policy and I was given the opportunity to lead that process.

So I found myself in an interesting dilemma whereby on one side, I was working for an Oil Company, getting an extremely good salary, but then on the other side, government was asking me to lead the process of drafting a policy with no pay. But I could not participate in that process whilst being an employee of Statoil because that would be conflict of interest.

So I had to make a tough decision and I decided to resign from Statoil so that I could participate in the process. So I participated in that entire process; I instituted all the discussions in drafting the local content policy in Tanzania.

 As a result, in December 2014, the Ministry of Energy and Minerals asked me to join them internally to help develop Local Content.  I did that for almost a year, but in the course of our work, I was appointed to join the Prime Minister’s Office to start up the Local Content Department which I successfully did up to June 2016.

Most local businesses in East Africa do not have the capacity to compete for big contracts. And at the same time lack the skills to run some of the created jobs, how best can we exploit the foreign investments in our countries?

The only way we can participate meaningfully is on the procurement. When you are to look at our governments budgets, 60-70% is on procurement in all countries. Even with the companies and other organizations, almost 60-70% of the expenditure is on procurement. Either it is procurement of goods or procurement of services. That means that procurement is a very important strategic part and the best way nationals can participate meaningfully and benefit.

But most of the time procurement is neglected and most of our focus is on the jobs yet if the majority of us had businesses that are engaged in the oil and gas sector, we would hire people and automatically solve the unemployment problem through the participation of more Small and Medium Businesses.  One of the ways of retaining money in an economy is through local employment.

So when we look at that supply chain, we cannot say that there are no opportunities for locally owned businesses to participate, there are many. Locally owned businesses participate in things like cleaning services, security, catering, printing, tour and travel.

 But the only problem is that there are no mechanisms to ensure that that happens. So as a country, once you go through your entire analysis when you are developing your regulations, you can capture that for this type of service, it must be from a locally owned business.

Wouldn’t that tantamount to protectionism is prohibited?

All developing countries are members of the World Trade Organization, and in WTO agreements, protectionism is prohibited. Many countries that come up with strict local content policies are issued with threats of being reported to the WTO, but one thing that people should know is that Local Content has been accepted for LDCs for a certain period of time.

So if you are a Least Developing Country you are accommodated under the UN requirements, you can enact local content protectionism policies for a certain period with the aim of developing your local industry to be competitive.  

It should have an agenda that may be you want to develop the skills set to be competitive or the business set to be competitive.  And protectionism is not just in African Countries; the United States of America has protectionism too.

They have the Maritime Act which says that any ship that is not registered with the US cannot sail within the waters of the US, which is pure protectionism.  Canada too, has some sort of protectionism with their indigenous operations; even India came up with some sort of protectionism for their energy sector.

How Beneficial will it be to the Nationals?

This will help to spur development in that the locals. They will be willing to invest because there are opportunities. The investors don’t do all the work, they sub contract along their supply chain.

So if Chinese Company is sub contracting to a German Company and the German Company sub contracts Finnish Company and the Finnish Company sub contracts Danish Company then you find that the Local Companies are participating in just collecting rubbish or distributing the paper and those other things which are not value adding.

 So you wouldn’t wish to find yourself in a place where you are reporting to your citizens that such and such an amount has been contributed to your economy yet it is not true in reality.

What is Tanzania’s story so far?

In Tanzania, we have a lot of natural gas which was found offshore. You cannot export gas in its natural form, it needs to be liquefied at an LNG plant, put in tanks and then shipped.   There are different types of LNG, You can have a floating LNG where you have a massive ship in the middle of the ocean and everything is done offshore. The ship comes fully equipped and it does everything required to do in the ocean without any attachment to the land.  

The main advantage of a floating LNG is that it is very quick and it reduces a lot of time and costs for the investors. But the biggest risk is that there will be an extremely limited local participation. It will be almost impossible for the locals to play a role in the middle of the ocean because they don’t have the capacity, expertise, experience and even the required certifications. So basically the ship would come fitted with all the required equipment, do everything and leave.

Now for Tanzania, the Government decided specifically that it wanted an onshore LNG. That option of an offshore LNG was ruled out for Tanzania. That decision was taken to ensure that there is Local Participation and that there is benefit for the country.

 And of course when you have natural gas, you have to look at your domestic gas market. For Tanzania, it is specifically stated that 10% of the gas has to be dedicated to the domestic market, whether at any given moment the domestic market is using the 10% or not, it doesn’t matter.

A country needs to state the minimum because if you don’t do that, there is a big likelihood that the investors will export everything and you will be left with nothing. For example Tanzania is saying it wants 10% of the gas but at the moment Tanzania is utilizing only 1%, so you will find that the Investor would prefer to take the 99% and leave you the 1% that you can consume. 

You have to be strict in making sure that the 10% allocation remains even if it is not going to be used, it can be reserved.  So Tanzania has the National Natural Gas Utilization Master Plan, and it gives a lot of direction on how gas is to be exploited.

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