February 7, 2013

Rubondo Calls For Debate On Secret Oil Agreements

Drilling Machinery in Kigorogoro Buliisa, western Uganda
Drilling Machinery in Kigorogoro Buliisa, western Uganda

The continued secrecy surrounding the agreements, which Uganda government signed with oil exploration and production companies is not about to cease attracting queries and debates.

There have been public demands including a lawsuit for government to make the agreements public documents since 2006 when a discovery of commercial quantities of oil was announced.

Ernest Rubondo, the Commissioner for Petroleum Exploration and Production Department, admits that there is anxiety over the confidentiality government has imposed on the oil agreements. He explains that there is need to hold public debates to explore whether or not to lift the secrecy on the deals.

He says that the confidentiality was a result of the fact that in the past years when Uganda was developing the Production Sharing Agreements, none of the oil producing countries had their agreements in the public domain. As a result, he said they managed to constitute an agreement without reference to any country’s model.

He however said that the global secrecy on the agreements is gradually receding with a few countries availing their agreements in the open.

He named Azerbaijan, Timor Leste, Ghana and Congo Brazzaville as some of the only 8 countries with their Production Sharing Agreements signed with oil companies available in the public domain, a change, which he said occurred only over the last three years.

According to Rubondo, even Norway, the country Uganda uses as a role model of the best practices in oil management does not have its oil agreements in the open. He however said that a public debate on whether or not to lift the confidentiality would help address the dilemma.

In his book, The Story Of Petroleum Exploration In Uganda 1984 – 2008: A Matter Of Faith; Reuben Kashambuzi, a former Commissioner in the Ministry of Energy’s Petroleum Exploration and Production Department attempts to provide some insight into the secret agreements.

Kashambuzi, who currently works as a Chief Technical Adviser in the Ministry of Energy and Mineral Development, says that Production Sharing Agreements were difficult to administer due to the many items to execute.

He advises that the country may wish to opt for concession agreements in future. He disclosed that the 1997 agreement with Heritage stipulated that the company would pay a corporation tax of 35 percent; a figure he said was revised to 30 percent for the subsequent agreements.

Kashambuzi added that all Production Sharing Agreements signed before 2002 did not attract Signature bonus, a fee paid when oil companies sign agreements with government, to help attract more companies to the country. The agreements also provide no restriction on repatriation of profits.

However, until the Production Sharing Agreements become public, the closest most people will get is speculation.

Under the Production Sharing Agreement, all the risks involved in oil exploration and production is on the licensed company while government remains owner of the resource while Concession Agreements entrust all the risk and ownership on the licensed company with government only entitled to money from the taxes and royalties.

 

 

 

 

 

 

 

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