MPs Disappointed With New Oil Agreements

2257 Views Kampala, Uganda

In short
Legislators say they are disappointed with government’s decision to sign two new agreements with Tullow Oil Uganda. Government on Friday morning signed two Production Sharing Agreements—PSA with Tullow Oil Uganda Limited regarding the development of petroleum resources discovered in exploration areas 1, 2 and 3A.

Legislators say they are disappointed with government’s decision to sign two new agreements with Tullow Oil Uganda.
 
Government on Friday morning signed two Production Sharing Agreements—PSA with Tullow Oil Uganda Limited regarding the development of petroleum resources discovered in exploration areas 1, 2 and 3A.

The agreements grant new licenses for the Kanywataba prospect area for six months and Exploration Area 1 for one year.

In October 2011, parliament unanimously resolved that a moratorium on executing oil contracts and transactions be put on government until the necessary laws have been passed by parliament.

The resolutions came after a two day heated debate in which some cabinet ministers were accused of receiving bribes from Tullow Oil.

Buliisa County MP Stephen Mukitale says the issue is about having an established national oil company to regulate all these transactions. He says he does not understand why the ministry does not find tabling the bill important. According to Mukitale, it is disappointing that the agreements are done without comprehensive laws.

Abdu Katuntu, Bugweri MP and one of the vocal voices during the October 2011 special oil debate, says the action by government is contemptuous. He notes that government had committed that it would bring the bills to parliament.

Ndorwa East MP Wilfred Niwagaba noted that the law used by the energy ministry to sign new oil agreements is obsolete. Energy Ministry says the law used is drawn from the Petroleum (exploration and Production) Act 1985 that was revised in 2000.

Despite this development, Irene Muloni, the Minister for Energy still insists that the parliamentary resolutions reached in October last year were merely advisory to government. She says the resolutions were discussed extensively in Cabinet and President Yoweri Museveni wrote to the speaker in regard to the resolutions. The ministry of Energy was subsequently cleared to conclude the transactions.

//Cue in: The resolutions…..
Cue out:……not be halted.//

According to Muloni, some provisions in the Production Sharing Agreements include minimum work programme together with the minimum exploration expenditure. Also included in the PSA was the provision for an advisory committee consisting of representatives from government and the license to review and approve all annual exploration work programmes, budgets and production forecasts.

Tullow will pay Signature bonus of US$ 200,000 for Kanywataba prospect area and US$300,000 for Exploration Area 1. Signature bonus is the payment made upfront to the host country for the right to develop a block commercially before work begins. It is a system that is legally accepted for an oil company to secure the right to explore a certain field.

Each of these two PSAs has discovery bonus amounting to US$2 million.

Muloni told MPs that the Memorandum of Understanding has been approved by the Ministries of Energy, Justice, Finance, and the Uganda Revenue Authority. These government entities actively participated in the negotiations of the MOU between government and Tullow Oil signed on March 15, 2011.