6 December 2012

Uganda: Civil Society Warns MPs On Clause Nine of the Petroleum Bill

Photo: New Vision
Parliament passes the petroleum Bill.

The discovery of oil will contribute significant amounts of tax revenue but only if a clear tax collection framework is put in place, experts have observed.

"What we are seeing, Members of Parliament fighting in the house like school boys. It shows you where we are heading too. Uganda has discovered the oil but we need to tread very carefully or we shall become losers at the end," said Henry Bazira the Executive Director Water Governance Institute (WGI).

Bazira also chairperson of the Civil Society Coalition on Oil & Gas (CSCO) said according to statistics, from the oil discovery, the oil would be enough to fund Uganda's budget up to 90% but it won't last for more than 10 years.

"Officially, no revenues have been generated from the oil, because commercial production has not yet started; but reality is that there are revenues (taxes) that should have been earned i.e. signature bonuses, capital Gains Tax, Import duty, Stamp duty, PAYE, VAT, but are no- where," he said.

Addressing participants at the 2nd Anti-Corruption coalition Oil and Taxation workshop organized by SEATINI at Hotel Africana, Mbazira pointed out a significant amount of tax revenue has already been lost inadvertently and intentionally.

"Revenues (taxes) should have been earned but nothing is forthcoming. An investigation of the monies that should have been earned, but have not been earned needs to be done. It is clear that Ugandans are the losers and the winners are the International Oil Companies," he said.

Uganda has discovered commercially viable oil reserves estimated at 3.5billion barrels. 'With a 30-40% recovery it is possible to extract 1.05 - 1.4billion barrels of crude at an average price of US$95 per barrel, Uganda's oil can be worth US$133billion dollars," he said.

He said basing on the 250,000 barrels of Oil per day production, an estimated US$2.0-3.5billion can be earned, doubling the country's revenue base and contributing 50-90% of the national budget and 10-15% GDP during 10 years of peak production.

The civil society organisation urged Parliament to ensure that clause 9 of the contentious Petroleum Bill is passed without any further remittals.

He said the proposed Petroleum Bill attempts to mirror the 1985 Act which vests all powers on the minister responsible for the sector. "Efforts have been made to rectify this problem but it has met a lot of resistance from the executive," said Mbazira.

Mbazira noted that in 2007 Energy Africa transferred assets/ interests to Tullow at a price of S1.1billion, but no CGT was paid; "In 2007, Hardman Resources sell to Tullow of US$500m, but no Capital Gains Tax (CGT) was paid;

"In 2008, Heritage Oil & Gas Ltd sold its first 50% petroleum assets/ interests to Tullow at undisclosed fee, but no CGT was paid;" he said.

In 2009-2010, Heritage sold its last 50% stake at US$1.45billion to Tullow and was supposed to US$400m CGT, but to-date Uganda is undergoing a very expensive (11.9 billion Uganda Shillings) arbitration case in London, with no guarantee that the case will be ruled in Uganda's favour.

He said in 2011, Tullow sold two thirds of its stakes to CNOOC and Total F&P Ltd at US$2.9billion and was supposed to pay US$479m as CGT. However, this too has not yet been paid, because of disagreements and is likely to result in another arbitration case.

He noted that the Production Sharing Agreement (PSAs) remain publically inaccessible, except to a few government officials; "MPs have limited access to PSAs and yet these are supposed to inform the law making processes;

The existing 1985 Petroleum Exploration and Production Act is responsible for the many problems, including taxation that Uganda has experienced recently.

"Any amendments to clause 9 by MPs will tantamount to an illegal corruption. Let us have a referendum on this, that is if it is not already smuggled and passed by Parliament," said Prof. Ndebesa Mwambustya of Makerere University Department of Development Studies.

He urged the electorate to be on the watch-out for the MPs who will vote in favour of clause 9 and shun them come 2016.

"We are watching you, and we shall mobilize the community to ensure that all those who vote are not returned to parliament," said Ndebesa. He said it was unfair that the

Agnes Kirabo from VEDCO Uganda said they will monitor the events from Parliaments gallery and head to the electorate.

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