Uganda: Government Dispels Talk of Delaying 'First Oil'

Government of Uganda is neither frustrating nor delaying International Oil Companies (IOCs) from making a Final Investment Decision (FID) - that is expected to pay way for country to start oil production.

In a statement, Ali Sekatawa the Director Legal and Corporate Affairs at the Petroleum Authority of Uganda, described media reports that government was delaying FID as wrong.

A Final Investment Decision (FID) is a decision investor like oil companies makes on whether to invest or not to invest in Uganda's oil production and is expected to trigger the country's oil and gas industry into the next phase. Sakatawa says instead government has been involved in protracted negotiations with oil companies to clear some hurdles the FID.

He defended the "unending negotiations" currently ongoing between Government and the International Oil Companies (IOCs) as good business practice and meant to ensure that the country maximizes benefits from the industry. "The assumption is that the Government team has ignored or does not appreciate the business aspects of the negotiations to the detriment of the petroleum sector, and that this is delaying the Final Investment Decision (FID). This is factually wrong," Sakatawa said.

International Oil Companies have injected US$3 billion in Uganda's oil industry over the years while Government of Uganda has injected US$1 billion (approximately Shs 3.7 trillion) on the required critical infrastructure.

According to Sakatawa, the issues under current discussion are not "taxation issues" per se, but also include, technical, commercial and legal issues which will contribute to the sustainability of the country's oil and gas industry for generations. "Taxation and revenue sharing are indeed vital components in the entire commercial structure of the oil and gas projects and it is important that these are aligned in order to ensure certainty of the projects for the entire life of the oil and gas fields to be produced," he said.

He added, Negotiations of this kind, which affect a country's economy in the long-term, are a normal part of the global oil and gas industry. "It is, therefore, erroneous to regard negotiation as detrimental to the country. To say that the ongoing negotiation has "killed the industry" is to miss the point. The presumed "unattractiveness" of Uganda's petroleum industry is wrong as well," Sakatawa said. He said the protracted negotiations are meant to ensure that the country avoid the resource course syndrome.

He notes that while a lot is said about the extensive training of the oil and gas technocrats in the technical fields, not enough is said about the technocrats who have been trained in top global institutions in petroleum finance, economics and taxation. "These officials are actively part of the ongoing negotiations and are cognisant of the need for a delicate balance for a return on investment by IOCs and creating lasting value for Ugandans. As the negotiations go on, the country awaits FID on the oil and gas projects. The wait may seem long, but every step that has been taken over the years has been necessary and vital to ensure the success and sustainability of the industry," Sekatawa said.

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