Oil and governance in Uganda: civil society perspective A presentation made to World Bank Staff-Uganda, Nov 29 th, 2010 By Dickens Kamugisha, CEO-AFIEGO

The issues for discussion How to manage expectations from now until oil starts to flow ? How will the weak governance environment affect equitable distribution of oil revenue ? How to ensure that the possible environmental risks are best mitigated ? What do you see as changing roles of development partners, like the Bank, once Uganda's oil revenues come on stream

Presentation outline

Environmental management Social safeguards Off-shore and transboundary issues. Infrastructure access Capacity to manage oil resources Employment opportunities Infrustructure

Uganda’s efforts to find oil Uganda’s oil development process is a long story, dating back to 1920s. However, in 2006, our efforts were finally rewarded with the discovery of huge oil reserves. As we speak, the country now has over 2 billion barrels of oil reserves and conservative estimates indicate that Uganda will earn around US$2 billion dollars per year for the next years. This is more than the US$1.7 billion the country gets from official budget funding by donors per year.

Legal, policy and institutional framework The 1995 Constitution (as amended) in The Oil (Exploration & Production) Act 1985 (amended in 2000). The 1993 Chemical Waste Management regulations. The 1997 NEMA Act and the 1998 EIA regulations. The 1997 Income Tax Act regulations (as amended in 2008, 2009 and 2010).

Laws contns The Uganda Wildlife Act The Water Act The 2002 National Energy Policy. The 2008 Oil and Gas policy The 2010 draft Petroleum (Exploration, Development, Production and Value Addition) Bill.

Some of the oil transactions lacking in transparency Since 2000, several companies have operated in Uganda based on licenses and Production Sharing Agreements (PSAs) While a few companies such as Tullow have continued and are preparing to enter the production phase, the majority have sold off their assets and have made huge profits. For example, in 2004, Hadman sold its petroleum assets to Tullow at US$500m- no tax was paid.

Transactions contns In 2006, Energy Africa sold its oil rights in Uganda to Tullow at US$1.1b- no tax was paid to government. In 2007, Heritage sold the first half of its oil assets to Tullow at an un-disclosed fee. Its not clear whether any tax was paid. In 2010, Heritage sold all its oil assets in Uganda to Tullow at US$1.5b where it had invested between US$150 & 200m, again no tax was paid here. In this transaction alone, Heritage made 9 dollars on each dollar it had invested.

Developments Over six Production Sharing Agreements (PSAs) signed between government and oil companies- these remain secret. Early Production Scheme (EPS) planned for later suspended. Plans to build a thermal power plant and a refinery at Kabaale, Buseruka-Hoima district- no information and public participation. Again, no information about a feasibility study on the refinery and thermal power plant.

Devt contns Over 10 Environmental Impact Assessments (EIAs) have been conducted on oil projects in the Albertine Grabeen but there is lack of public participation. The language is always in English for both the processes and the EIA reports. Plans to build a pipeline/railway line to Mombasa- no clear plans.

Lack of public participation-suspicion & expectations Licenses and their processes-secret. PSAs secret. Feasibility studies secret. EIAs poorly done and EIA reports in non local languages. EIAs done by interested parties. Delays in putting right laws and institutions in place. Poor implementation and enforcement of laws and policies.

Secrecy contns Over US$300,000 have been paid in signature bonuses but no accountability for it.

Concerns in the oil region most of the oil regions have high poverty levels and they expect oil revenues to get them out of the poverty trap. Land question, there is need to put in place a policy for managing customary and communal land-free land titles for all programme. Compensation policy to ensure that people get adequate and predictable compensation. Policy for oil exploitation in sensitive and transboundary resources such as the River Nile, Lake Albert, national parks, etc. The governance questions of the Eastern DRC and its implications for oil on the Ugandan side.

Some of the initiatives by NGOs Have organized over 11 expert facilitated training meetings on oil governance for MPs, media, CSOs and some government officials. Petitioned the speaker of Parliament and the minister of energy for the disclosure of PSAs. We are pushing for the implementation of the 2008 oil and gas policy, the Objective VI on Extractive Industries Transparency Initiative. Formed Publish What You Pay – Uganda and Bunyoro Chapter. Have organized over 51 community trainings in the oil regions.

Areas which need a lot of focus There is need for CSOs to provide evidence based policy options to government on oil activities in the sensitive areas of the Graben. Local communities especially in the oil regions need to be sensitized about oil and its possible opportunities and challenges-feel of ownership and blonging. The 2008 Oil and Gas policy needs to be effectively implemented. The new petroleum laws need to put in place immediately. Uganda should adopt and implement EITI as a demonstration against corruption.

Areas of focus EIA processes need to be participatory (public hearings, EIA reports in local languages and district environmental offices strengthened. Licensing process should be competitive. The decisions for any development option should be open and transparent (ie options for a refinery or pipeline or railway line should be based on evidence and honest, professionalism andpublic consultations). The quest for the region and particularly must be discussed openly rather than ignoring it.

conclusion To date, there is no evidence that Uganda is sufficiently using lessons from other oil producing countries to make our oil a blessing because: Secrecy is still the order of the day. There are no sufficient and strong laws and institutions to guide the industry. Corruption is still high in the country. Major decisions on oil are being made politically eg taxes.

Conclusion contns Already, some companies are selling their oil assets and leaving without paying taxes. EIAs are carried out by interested parties in the names of developers. Oil activities are going on in sensitive and gazetted areas without a clear legal framework for conservation and tourism. Government will get oil money to fund its budgets and this means donor pressure will reduce- this may increase corruption. CSOs will be bought off or suppressed using the money of repressive laws.