Ugandans await oil opportunities

A visit to Gunya-1 oil well in Buliisa district points to one hard truth in Uganda’s petroleum industry: the majority of the highly-skilled workers are not Ugandan.

Almost all the people operating the K900 oil rig, drilling the Gunya-1 appraisal well, are expatriates. Only one Ugandan (a drilling engineer) with the Petroleum Exploration and Production Department (PEPD) was at the rig, alongside the expatriates.

The rest of the Ugandans at the site were merely security guards and other causal workers.

Changing gears

Debate around local content in Uganda’s oil industry tends to get tetchy, amid accusations that oil companies are only paying lip service to the whole idea of local content. However, other business players are finding new ways of tapping the opportunities in the industry.

The Uganda Chamber of Mines and Petroleum, an association of players in the oil and mineral industry, supports monthly cocktails where the members – both Ugandan and foreign – can interact and find ways of building and hiring Ugandans.

Another association, the Oil and Gas Service providers, has been formed with the idea of growing Ugandans’ participation within the oil industry.

Other initiatives have been partnerships within the logistics industry. The logistics industry is supposed to play a key role in mainly transporting heavy machinery from the East African coast to the oil wells in western Uganda.

To do this, there have been mergers and buy-ins within the logistics industry as international firms eye the business in the oil industry. Still, foreign interests with ample financial muscle and experience continue to attract the attention of the upstream oil companies.

The law

The Petroleum (Exploration, Production and Development) Act, 2013, which became effective in April this year, is supposed to set the stage for the growth of local content. However, the law can only do so much.

Bukenya Matovu, the spokesperson for the ministry of Energy and Mineral Development, said though the petroleum industry presented new employment opportunities for Ugandans, the public had to play a role and acquire the necessary skills in order to be absorbed within the sector. The act compels oil companies to employ Ugandans if they qualify for the job. It also makes it mandatory for oil companies to have plans of technology and skills transfer.

“The licensee shall within 12 months, after the grant of the licence submit to the Petroleum Authority for approval, a detailed programme for recruitment and training of Ugandans in all phases of petroleum activities and shall take into account gender, persons with disabilities and the host communities,” the act reads in part.

The act further compels oil companies to submit a report to the Petroleum Authority on achievements of trainings and recruiting Ugandans on an annual basis. Part of the training, the act emphases, might include offering Ugandans scholarships and financial support towards their education. To this end, Tullow oil and Total have given several Ugandans scholarships to further their studies.

Zakalia Lubega, the Corporate Social Responsibility Manager at CNOOC, reveals the company will soon launch its own scholarships. Besides employment, another important aspect of local content is buying local products like food, construction materials whenever they are available, as opposed to importation.

The act compels a licensee, its contractors and sub-contractors, to give preference to goods which are produced or available in Uganda and services which are rendered by Ugandan citizens and companies.

In case such goods or services are not available in Uganda, the law provides that they [goods and services] shall be provided by a company which has entered into a joint venture with a Ugandan company provided that a Ugandan company has a share capital of not less than 48 per cent of the joint venture.

The licensee is also required to, within 60 days of the end of each calendar year, provide the petroleum authority with a report of its achievements and its contractors and sub-contractors’ achievements in utilising Ugandan goods and services.

Recently, there were reports that Tullow Oil was sidelining Ugandan firms in preference for foreign companies on grounds that the local companies did not have the required quality and capacity.

Regulations

Bukenya, the ministry spokesman, says although the law does not provide for sanctions, the regulations that the ministry is already drafting will seek to punish non-compliance.

“The law doesn’t have to include everything; it sets out principles and standards. The ministry is now drafting regulations to operationalise the law,” he said recently. The new regulations will repeal the Petroleum Exploration and Production Regulations 1993.

Since local content is already provided for in the act, Bukenya stresses that the new regulations are to focus on how, in reality, local content can be achieved.

“The regulations will demand that for expatriate staff, there is a Ugandan counterpart being trained to take over,” he said.

Under the regulations being drafted, oil companies will be given only three years to have expatriates on their books. And after the expiry of the three years, the expatriate’s work permit will not be renewed, paving way for a Ugandan to take over.

PEPD estimates that the oil industry will employ between 10,000 and 20,000 people. The act also establishes new institutions: the directorate of petroleum, the Petroleum Authority of Uganda, and the National Oil Company, among others.

Fred Kabanda, a principal geologist in PEPD, notes that the establishment of these institutions, coupled with other production and exploration activities, creates an excellent opportunity for Ugandans to participate in the sector.

“All these institutions will need qualified staff; oil companies that will be licensed will also need staff; so, this is an opportunity. Ugandans need to prepare themselves to tap into these opportunities,” Kabanda said.

Kabanda notes that so far oil companies have been compliant towards hiring local staff. For instance, Tullow recently noted in its 2012 Corporate Social Responsibility (CRS) report that up to 88 per cent of its staff in Uganda are Ugandans.

“Whenever we can, we offer Ugandans the first opportunity,” Cathy Adengo, Tullow Oil Uganda’s Assistant Corporate Affairs Manager, said.

Kabanda says 70 per cent of Total E&P staff are Ugandans, while the Chinese firm CNOOC is at 60 per cent.

Challenges

Despite the impressive figures, Bukenya says getting qualified and experienced Ugandans in highly technical areas in the industry still remains a challenge.

“When it comes to high technical areas like operating and engineering of rigs, we don’t have Ugandans there,” he said.

This, he acknowledges, is likely to stay this way for some time because neither oil companies nor government own an oil rig.

“The rig is hired together with its manpower,” he pointed out.

ssekika@observer.ug