Will The National Content Requirement In The Oil And Gas Sector In Uganda Benefit The Host Communities?
Written by: Angualia Daniel
There has been general excitement on the part of the host communities at the potential for development, improvement of household incomes and the general standard of living once petroleum revenues start flowing. The Government has determined that this can only be achieved by having in place a robust National Content strategy aimed at increasing the use of locally available labour, technology, enterprises and other resources in the oil and gas sector. This article explores the national content requirements and how the host communities stand to benefit if the companies involved in the oil and gas sector comply with the local content requirements.
By way of definition, national content is the level of use of Ugandan local expertise, goods and services, Ugandan companies, Ugandan citizens, registered entities, businesses and financing in petroleum activities. The 2018 National Content Policy for the Petroleum Subsector in Uganda defines it as ‘the value added or created in the Ugandan economy through the employment of Ugandan workers and the use of goods produced or available in Uganda and services provided by Ugandan citizens and enterprises.
The justification for local content is that the state is mandated to protect important natural resources including land, water, wetlands, minerals, oil, fauna and flora on behalf of the people of Uganda. The Government of Uganda therefore holds petroleum rights on behalf of and for the benefit of the people of Uganda. The people of Uganda must benefit from their oil resources either directly or indirectly.
National content compliance requirements
- Under the Petroleum (Exploration, Development and Production) (National Content) Regulations, 2016, a company shall not provide goods, works or services for petroleum activities unless it is in the national supplier database. The Petroleum Authority of Uganda has developed a National Supplier Database (NSD), a register of entities and persons with interest to provide goods, works and services to the oil and gas sector in Uganda. Such registration will ensure that only capable and approved companies engage in the sector for its success. This will also eliminate brief case companies in the sector with the risks of duping the host communities. In the same way, enterprises in the sub region should also register with the Petroleum authority of Uganda if they are to benefit. The requirements to registration include; a certificate of incorporation, tax registration and clearance by Uganda Revenue Authority, clearance with National Social Security fund, letter of recommendation from the bank among others.
- Under the Petroleum (Exploration, Development and Production) Act 2013 and Section 53(1) of the Petroleum (Refining, Conversion, Transmission and Midstream Storage) Act 2013, The licensee, its contractors and subcontractors are required to give preference to goods which are produced or available in Uganda and services which are rendered by Ugandan citizens and companies. Where the goods and services required by the contactor or licensee are not available in Uganda, they shall be provided by a company which has entered into a joint venture with a Ugandan company provided that the Ugandan company has a share capital of at least 48% (forty eight percent) in the joint venture. This requirement gives opportunity to small enterprise in the host communities to supply goods and services in the oil and gas sector. Where they do not have capacity, there is room for them to have a joint venture arrangement with the big international companies so as to provide the service or goods where they would otherwise not be able to provide the goods and services.
To minimize confusion, the Petroleum (Exploration, Development and Production) (National Content) Regulations, No.44 Of 2016 defines a “Ugandan company” to mean a company incorporated in Uganda, provides value addition to Uganda; uses available local raw materials; employs at least 70% Ugandans and has been approved by Petroleum Authority of Uganda. For the joint venture to be approved by the Authority, it must demonstrate; Technical and financial competence and be able to deliver the goods and services in a timely manner; must have capacity to transfer knowledge and technology to Ugandan citizens; and have experience in provision of the required goods and services. The approval is intended to ensure that the joint venture adds value to the Ugandan company by way of experience, finance, training and knowledge transfer.
- The companies involved in the oil and gas sector are also required to develop and submit to the Petroleum Authority for approval, a transparent policy and plan on training and employment of Ugandans, specifying the required minimum qualifications, an outline of the hiring and training needs of the licensee and the licensee’s major contractors with a breakdown of the skills required, the activity-specific training requirements and the anticipated expenditure to be made directly by the licensee in implementing the employment and training plan. Under this requirement, the host communities stand to benefit by way of employment and training opportunities. Indeed good number of people from the sub region have been trained in welding, technicians, driving heavy transportation vehicles. Some of the companies in the sector have already signed memorandum of understanding with the training institutions in the region to use their facilities for training of potential workers in the sector.
- Training, technology transfer and capacity building for citizens. The Petroleum (Exploration, Development and Production) Act 2013 states that a licence is required to include a clearly defined training programme for the Ugandan employees of the licensee, which may be carried out in or outside Uganda and may include scholarships and other financial support for education. A licence is also required to include a commitment by the licensee to maximise knowledge transfer to Ugandans and to establish in Uganda, management and technical capabilities and any necessary facilities for technical work, including the interpretation of data. Many Ugandans from Ministry of Energy, Police, Office of the Administrator General have been trained in the different fields of oil and gas as away of building capacity in the sector.
By way of conclusion, Participation of the host communities and citizens as a whole in the oil and gas sector will require capacity building and training of citizens to work in the sector. Training needs to focus on building capacity for direct employment and for services auxiliary to the sector. The enterprises within the host community must also prepare for the opportunity by doing the basics like registration in the national supplier data base managed by Petroleum Authority of Uganda.