The Observer (Kampala)

Uganda: Auditor General Audits Oil Sector

Previous audits found out that some oil companies brought in nurses as 'expatriates'

Another government watchdog is sniffing around oil companies to ensure that Ugandans are not unnecessarily losing jobs to foreigners.

With the ministry of Energy and Mineral Development and Uganda Revenue Authority already keeping an eye on oil companies, the auditor general is conducting a value-for-money audit on local participation, commonly known as local content, in the petroleum sector.

Joseph Hirya, the director, Audit, in the office of the Auditor General (OAG), said they decided to conduct a special audit after discovering irregularities in previous audits. Hirya was making a presentation titled, "Following the money in the extractive industry: The experiences of the Office of the Auditor General in Uganda" at Makerere University last week. The conference was organized by Global Rights Alert and Publish What You Pay (PWYP) Norway.

The conference drew participants from Ghana, Liberia, Tanzania and South Sudan, among others. It mainly focused on transparency and accountability in the extractive industries in Africa. Hirya underscored the role of the office of the auditor general in fostering transparency and value for money in the petroleum industry.

"In our previous audits in the oil sector, we realised that some oil companies were bringing 'expatriates' whose trainings and skills could be found here. For instance, we found that some companies had brought in nurses as expatriates yet we have many nurses here. So in our audits, we disallowed such expenditures," he said.

According to Production Sharing Agreements (PSAs), the auditor general determines which costs are recoverable from Ugandan taxpayers. Hirya added: "That is why we [office of the auditor general] are currently undertaking value-for-money audits on local content."

The special audit, Hirya said, is meant to find out how oil companies comply with local content provisions and ensure that the firms are not hiding under the cloak of 'expatriate' to deny Ugandans job opportunities. The OAG has also completed a special audit into oil waste management and the report is out, he said.

According to Hirya, to date, the auditor general has audited 17 Production Sharing Agreements (PSAs). However, due to the complexity of auditing the oil sector, the OAG has set up a special team of 16 well-qualified staff to conduct regular audits in the sector. This team includes accountants, performance auditors and geologists, among others.

Oil regulations:

In the same conference, civil society organisations and legislators complained about the tendency for Uganda to make laws without implementing them. Igara East MP Michael Mawanda said the Petroleum (Exploration, Production and Development) Act had not been implemented, one year after President Museveni assented to the attendant bill in March 2013.

"Why is it that one year later after assenting to the petroleum bills, nothing has happened? This is the problem; failure to implement laws," said Mawanda, a member of the Parliamentary Forum on Oil and Gas (PFOG).

The Petroleum Act 2013 creates three crucial institutions: the directorate of Petroleum, the Petroleum Authority and the National Oil Company, but none has been established.

"There is no petroleum authority in place and what this means is that we [country] can't license because the power to issue licences is vested in the authority and not the ministry," Mawanda said.

However, Peter Lokeris, the minister of state for Minerals, said government needed to be cautious to ensure proper management and exploitation of the resource. The ministry of Energy, he said, is drafting the regulations and will soon establish the institutions.

On land acquisition for the oil refinery, Mawanda said that compensations for the affected land occupants were done in a hurry and without following procedures. Lokeris rejected this, saying that those who feel aggrieved could seek justice in court.

"I have heard some people have gone to court. Let them go; it doesn't matter. After all, the law says government can acquire land compulsorily for public interest. The reality is we have to extract that oil," he said.

Recently, former residents in the refinery site filed a representative suit in the High court in Kampala, arguing that the resettlement action plan was not conducted in accordance with the law. Prof Byaruhanga Rukooko of Makerere University said government and other stakeholders needed to empower the public to demand accountability in the oil sector.

"Ugandans don't have the power to [demand] accountability in the petroleum sector due to oppressive culture and behaviour of our political leaders," he said.

He explained that political leaders in Uganda and Africa don't mind about human rights; rather, how they can keep a firm hold on power.

EITI commitment:

Lokeris pledged government's commitment to join the Extractive Industries Transparency Initiative [EITI] as a way of fostering transparency in the sector. If a country signs up to EITI, companies in the extractive sector publish what they pay to governments and governments publish what they receive from the oil companies.

This enables citizens to know the amount of earnings from the sector and then trail the money.

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