The Uganda government should urgently establish the National Content Development Fund to boost local companies, before it can embark on the drilling of crude oil, a local NGO, the Africa Institute for Energy Governance (AFIEGO), has said.
“In both the National Content Policy and the oil laws, government committed to establish the National Content Development Fund. To date however, government has failed to establish the Fund despite the oil laws having been enacted in 2013,” AFIEGO says.
According to AFIEGO CEO, Dickens Kamugisha, government must immediately mobilise funds to support local companies with affordable financing to compete in the oil sector in areas such as health, safety, environment protection, procurement, records keeping, certification and technology.
“Consequently, Ugandan companies continue to borrow capital from traditional banks at high interest rates of 20 to 30%. These companies are expected to compete with Indian, Chinese, American and other multinational companies that access capital at interest rates of 2 to 4% from their home countries,” Kamugisha notes, adding that three years to the oil production target of 2020, the Suppliers Fund that would enable the above does not exist.
Further, Kamugisha implores the Petroleum Authority of Uganda (PAU) to establish a National Suppliers Database and a National Oil and Gas Talent Register, a development that will lead to the realisation of intended benefits.
Kamugisha also urged government to empower institutions such as the Uganda National Bureau of Standards with relevant skills to ensure that no substandard goods are allowed in the oil sector.
He says the national content legal regime should be used to increase the participation of women in the oil sector across the entire value chain. “While the policy identifies that there is limited women participation in the sector because of financial and socio-cultural barriers, the implementation plan ignores putting in place interventions or actions to address this,” he says.
Uganda has proven crude oil reserves of 6.5 billion barrels in Hoima district, western Uganda, about 1.7 billion of which is recoverable. The country is to build and operate a 60,000-barrel-a-day refinery and is also in the final stages of the construction of the US$3.5 billion oil pipeline that will deliver refined oil for export at Tanzania’s port of Tanga.