Oil companies operating in Uganda, Tullow in particular, must appreciate the need to secure the `Social License’
On Friday Feb. 3, the media was awash with news of signing of new Production Sharing Agreements (PSAs) between Tullow oil and the government of Uganda. The gusto and excitement that surrounded the signing of these PSAs is proof that Uganda’s nascent oil and gas sector will never be the same again. It should be noted that these are not Uganda’s first PSA so the euphoria surrounding these particular PSA speaks volumes and there is more to it than meets the eye.
To begin with, the signing of these PSAs comes at a time when a parliamentary resolution slapped a ban on any oil transactions until the necessary comprehensive laws have been put in place. The government has been ferociously trading in high level legalese explaining to unsuspecting Ugandans how some of their actions are not affected by this resolution. The argument fronted is that this particular transaction is not new and has been on the tables for long. Perhaps this is the first time the government has tried so hard to explain its actions. Whichever way you look at it, it’s a positive sign for the young oil sector because previously, the government did not see any need to even inform Ugandans on how many PSAs have been signed let lone explain to them the significance of these PSAs.
The insistence of government to go ahead with the transaction, irrespective of its legality, after parliament had proposed a halt on oil transactions does not augur well for the good governance of the sector. One is left wondering what the executive is trying to prove by undermining the legislature. In doing so, the executive, is unknowingly proving how it is not willing to listen to its people. Parliamentarians represent Ugandans and when they speak, we expect those they speak to not to look at 388 legislators but look at over 32 million Ugandans.
During the oil debate in October, petitioners informed Ugandans how Tullow’s license to operate in the said blocks had expired and therefore it was premature to talk about the farm-down of their interests to France’s Total ad China’s CNOOC. In essence Tullow could not sell what did not belong to them. As Ugandans we could not tell whether the technocrats in the Ministry of Energy and Mineral Development did not know about this anomaly to go ahead with the farm-down talk even after expiry of licenses. Even after these revelations, we did not see a remorseful ministry; instead we saw a response that was on defensive, insisting how the petitioners had ulterior motives and did not wish Uganda well.
The call for transparency and accountability in Uganda’s oil sector is for the good of Ugandans. The government should engage in a frank discussion with all the relevant stakeholders and respect their views. For the government to rely on high level legal gymnastics to defy the people’s voice is a bit unfortunate. Given the circumstances surrounding Uganda’s oil sector, it would be only prudent for the government to show willingness to fix some of the gaps in the sector before going ahead with signing of more documents. Going ahead in this manner only serves to fuel speculation that some people have already been compromised and therefore transactions must go ahead even if it means defying parliament.
Oil companies operating in Uganda, Tullow in particular, must appreciate the need to secure the “Social License” to operate in Uganda. Granted, Tullow might get the signatures to continue with their exploration and production activities, but securing this against resistance from Ugandans is not good for their investment. The argument of losing time to back the rush does not add up because this is a long term investment that will certainly outlive all the individuals involved on the side of the company and the government. Ignoring institutions like parliament and going ahead to deal with individuals, be it even the president, is not a good practice for the companies. We expect the oil companies to contribute towards a stable legal regime in the oil sector because it’s in their best interest too.
In June last year, the Arzebaijani parliament had to adopt a law on approving a resolution for the first amendments to a contract on exploration, development and production sharing of the Azeri-Chirag-Guneshli (ACG) offshore fields, initially signed in 1994, and for us in Uganda we are basing on legal arguments and engaging in legal engineering (signing the agreements at 10:00 am when court is sitting at 2:00 pm to decide on the matter), to undermine resolutions of our parliament. In an ideal setting, the Ugandan parliament should have even approved the new PSAs.
Deus Mukalazi is the Coordinator of Publish What You Pay Uganda; a coalition of civil society organisations promoting accountability and transparency in the extractive sector.
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