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Delays in oil sector have been a blessing – Karuhanga

By Joan Akello

Elly Karuhanga, Chairman Uganda Chamber of Mines and Petroleum (UCMP) talked to Joan Akello about its activities and the extractives industry.

The date for first oil production was pushed from 2016 to 2017 and now 2021 or 2022? What do the delays mean?

These delays have been a blessing in disguise because if these things had come before we had educated our people may be we would not be in a position to handle. But now we are in a position to handle.

What about the challenges of the industry with reports of some companies laying off staff due to low or no activity?

People working in the oil and gas sector must always remember that it is a business which goes up and down. So when they are in the business of exploration, they employ people. When exploration is finished, the people they employed have to go. When they are in development, they will look for another skills set so those who did or do not have that skills set will have to be laid off.  When they are in production, those who were in development and exploration will go away and they will want those who know how to handle the refinery and pipeline. So the industry is that fluid.

Fortunately in the case of Uganda, we are doing all these in three blocks and now we are opening six new blocks so the people who were in exploration will be reemployed or hired by new companies coming to Uganda because they are really highly educated. They are not employed now but they will be. According to the latest update, 5,292 Ugandans are employed in the sector.

How significant to the oil sector is the scrapping of Value Added Tax (VAT)on exploration activities in the upcoming 2015/2016 budget?

It is very important.  This abolition is huge for the industry. To understand the impact of abolishing VAT on exploration of oil and gas goods and services, imagine you have borrowed Shs 100 million from the bank to mine a mineral or explore for oil and gas. It is very difficult to know whether you will find that mineral or oil deposits. Everything is hidden; you are operating like a blind person  looking where they have dropped a needle in the house and using only scientific things to tell you  whether it is the needle you are looking for or not. Now if you are going to spend 50 percent of what you have borrowed from the bank to pay taxes, and you do not find the needle, then you are bankrupt. So the best thing to do is to allow as many people to investigate Uganda and when they find the oil, we tax them.

You have been holding conventions and conferences about the sector, what impact have they had so far?

The biggest impact is to inform and educate the public about the sector. We share information with the public.  Decision makers, influential people who matter have not been updated sufficiently by the industry and the industry is very complicated, technical, professional and very specialised. It uses a different language, has got very funny and difficult phraseologies so that when the industry is speaking people who should know do not understand what is going on. It is to bring all people who matter to understand where Uganda is, where it was and where it is going tomorrow.

Why was ‘delivering our potential’ the theme of your recent convention?

What God gave us or what Mother Nature has been keeping in our kitchen is the potential but now we want to deliver it to the family, public, and friends worldwide. But are we ready to deliver it? So we are now opening the stores, getting the goods out in the most scientific manner, with the highest technological advancement tools, and with qualified people who are going to get the oil out. And what are they going to do with it? They are going to put it through the refinery, pipeline, and sell in international markets. They are going to build pipelines in Mombasa and when they set up the refinery, there are going to be petro chemical industries which we have to explain what these industries are and where the refinery will be built- someplace in Bunyoro, how the crude will be stored and where the tanks will be, in what size and how will we differentiate the refined products and the crude that we will be selling internationally plus where will we get the electricity to manage this?  Which are the roads and airports supposed to be built and who will finance them? Who is prepared to come to Uganda, what environment do we have, what taxes are we levying, what will Ugandans get out of all this? How will each Ugandan benefit from it, who are the people who will be subcontracted, or transport the logistics from Mombasa to Uganda , who is going to write the laws,  who are the lawyers, accountants or people who are going to build houses or leave?   Who is preparing people to go into production, or certain specialised equipment that are approved or who are going to certify the standards of all this stuff? All these require preparedness to deliver this potential.

How are we as a nation preparing to deliver?

We need the right education, skilling, and preparation to do this. That is why the Ministry of Education is talking about skilling, educating, and preparing the country.  Otherwise we shall have to go to Philippines, Thailand and put people on Emirates and bring them all at Entebbe Airport, take them to Bunyoro to do this because Ugandans have refused or not been prepared or told to ready themselves for the challenge mother nature has kept us in the store underground.  We are talking about how this whole thing is integrated within the region because we cannot do this thing alone without the Democratic Republic of Congo, Rwanda, Tanzania, Kenya, or Southern Sudan. The ministry of Foreign Affairs is talking about how they are preparing us to be the market leader; a new province that is on the cusp of developing incredible opportunities for the people in this region and how Uganda is going to become a hub for oil and gas in the whole of this region because of our level of high preparedness.

What other activities are you engaged in and what challenges do you face?

Our chamber is voluntary. We do not get paid anything but we are serious patriots; we think government needs to be supplemented by we civilians. Instead of just sitting there and waiting for government to do everything and then ask `gavumenti tuyambe’ can we not also join government or join hands and be part of the story? So we want to influence the laws that affect the industry, we want to urge government when they act too fast to slow or when they are slow to speed up. We want to be there as useful players of the industry. I think we are doing a good job.  The challenge is that you meet serious obstacles as you try to play this role because when you go to government, government has its speed that it works with. You cannot move them to move faster the way you want.  When you go to private sector, companies you support, they will not want to give you as much information as they should give you because they fear to antagonise the government. So you have to keep on guessing and pushing and pushing. It’s a challenge but we are getting there.

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