OIL AND GAS: Government Finally Agrees To Disclose Agreements

The sticking issue of the secrecy around the oil  Production Sharing Agreement has kept Ugandans unable to get the answer to the question of how much the country will get from the oil and gas sector.

The failure by the government to disclose the details, especially of how the oil revenues will be shared, has also caused speculation and conclusions, some showing that the oil companies will take most of the income and the country remain with just a tiny fraction if any.

Some have stated that the oil companies will take 70 per cent of the revenues and that Tanzania will charge Uganda more than 12 US Dollars per barrel to allow the crude to be exported through her territory. Yet, the companies will still claim ‘recoverable costs; the billions of Dollars that they have invested in exploration and production.

According to government projections, the country will earn at least 2 billion Dollars (close to 8 trillion Shillings) per year from the resource revenues. And with all this speculation, the government and the companies have remained mum on the details of the agreements.

“There are clauses in the PSAs that require confidentiality,” says Faustine Mugisha, the Commercial and Joint Venture Manager at TotalEnergies, the leading investor in Uganda’s oil and gas industry. He, however, adds that like all oil and gas companies, TotalEnergies is aware of the importance of being transparent, especially for the sake of the shareholders.

The absence of this is what causes the wrong conclusions, according to him.

Transparency is key in the extractives industry for many reasons, but also to keep the expectations of the citizens, the owners of the resources, in check, as well as the confidence of the shareholders.

Uganda is a member of the Extractive Industries Transparency Initiative, EITI, a global voluntary platform that helps countries maintain the ‘highest levels of transparency in handling the resources. Countries that fail to abide by this can be penalized or expelled, according to Gloria Mugambe, the head of the secretariat of the Uganda Extractive Industries Transparency Initiative, UGEITI, the local chapter.

Saul Ongaria, the National Coordinator of UGEITI says Uganda’s entry into EITI has committed enough that disclosure of all the contracts should be part of the process. Ongaria says engagements are already ongoing with the companies and both sides have agreed in principle to disclose.

He said, however, that in the same agreements, there are clauses that provide for confidentiality, meaning that the companies and the government must agree on what to disclose and how much and how.

Mugisha says that while they have been demanding that the industry discloses the Production Sharing Agreements, it is the government which has the final decision because it owns the resource. However, he says they can only continue advising on the need to disclose, ‘because it is the policy of TotalEnergies.”

On why the oil companies are now willing to disclose unlike previously, he says there is no longer much to hide, and that the situation has changed with oil already discovered and infrastructure being developed, like the export pipeline.

The companies and the government had withheld the information saying it was important for future negotiations with other companies that would seek licenses. If they were made public at the initial stages, it would give an advantage to other prospective companies getting ideas from them and using them for better bargaining powers at the expense of the state and the existing investors.

The companies have on their websites copies of the contracts in template form, with some of the most critical issues like revenues and bonuses not filled in.


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