18 November 2012

Uganda: MPs, Executive Agree to Disagree

At some point, the executive and Parliament were poles apart over a host of issues regarding the petroleum (Exploration, Development and Production) Bill, 2012 that it required convening the caucus of the ruling NRM to whip some MPs into line.

The Bill seeks to regulate petroleum exploration, development and production. It seeks to establish the Petroleum Authority of Uganda, provide for the establishment of a national oil company, regulate the licensing and participation of commercial entities in petroleum activities and to provide for transparent and competitive process of licensing.

It also seeks to provide for the decommissioning of petroleum infrastructure, to provide for safe petroleum activities and to provide for the restoration of ruined lands.

However, despite deferring decisions over a few touchy issues, the executive and Parliament, albeit grudgingly, have found common ground as the debate on the Bill winds-down.

In the clauses passed earlier this week, Parliament was able to wrestle significant power from the sector minister over controlling the oil sector.

According to the amendments, Parliament will approve board members of the envisaged petroleum authority and the national oil company, it will also approve all agreements entered into with investors.

But these amendments were not without opposition from the Government, as the executive and legislature sparred over who ought to wield the ultimate power in the sector.

Energy minister Eng. Irene Muloni vehemently opposed reduction of her powers, but she was easily overrun, as Parliament, chaired by deputy Speaker Jacob Oulanyah appeared to adopt a bipartisan approach on oil management issues.

In the draft Bill, the Government had proposed that the minister, "shall be responsible for granting and revoking licences and negotiating and endorsing petroleum agreements and approving field development plans."

MPs Abdu Katuntu, Wilfred Niwagaba and Lilly Adong contend that removing the minister "from the crude business" of negotiating oil deals will help shield her from possible 'temptations'.

In a tacit indicator that both arms of government are committed to seeing that the oil sector benefits Ugandans, the clause that compels oil companies to give priority to Ugandan workers sailed through without much ado.

The house also made environmental degradation as one of the reasons upon which an oil prospecting licence can be revoked.

However, the House deferred the decision on two issues where common ground could not be struck.

One of these was the clause that would have given the sector minister powers to grant licenses under "exceptional circumstances."

The Prime Minister, Amama Mbabazi and Muloni made a case for this provision citing national security and in cases where repeated adverts yield no interest from petroleum firms.

Also a decision is yet to be made on whether decommissioning costs incurred by petroleum companies should be considered among recoverable costs.

MPs warned that the Government would get a raw deal as oil firms might inflate these costs, citing the case of UMEME, where government has lost trillions of shillings in compensation for its operational losses.

As the debate on the oil Bills winds down, the public is banking on both the executive and the legislature to draft laws that will see Uganda avoid the pitfalls of countries like Nigeria, where oil exploration has spawned corruption, instability and environmental degradation. Uganda's oil inventory stands at 3.5 million barrels.

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