National Participation - Perspective of the Association of Uganda Oil & Gas Service Providers

7/27/2019 National Participation - Perspective of the Association of Uganda Oil & Gas Service Providers

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National Participation;Our Perspective

Presented by Association of Uganda Oil & Gas Service Providers 22-10-2013

Founder Members of the Association

Eagle Air Uganda Ltd

Globe Trotters LtdThree Ways Shipping Services Group Ltd

Bemuga Forwarders Ltd

Quantum Associates Ltd

Intercar (trading as Europcar)

Richflo Lift Services

Transtrac


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Background

The Association;

locally owned and incorporated.

Operating in the oil and gas industry since 1998.

Owned by indigenous Ugandans

Employs a total of over 9000 Ugandans

Invested heavily in acquiring land, equipment, farm

inputs and highly skilled staff.

Total investment in the economy is over USD 60M

Non Partisan, non racial and not for profit

73 member companies across the board; services,

banks, farming, insurance, transporters, clearing

agents, warehousing, catering, food production,

Construction, Drilling, Law firms, welding, etc


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Current Situation The industry

Development stage estimated at between

USD15bn-USD20bn with about 40% going to

logistics (PEPD)

Indigenous private sector stakeholders are

shouldering the weight with seemingly inadequate

support from the oil companies.

Relevant equipment and technical know-how is

hard to come by.

A lot of logistics, food, labour, equipment,

management and administration, etc will beneeded in this stage.


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Current Situation The industry

As we move towards the lucrative stage of devt; A number of international service providers; Baker

Hughes, Schlumberger, Agility, Halliburton, Saipem,

weatherford, etc have opened shop in Uganda

recently.

There is a law now compelling all non Ugandan owned

companies to cede atleast 48% ownership to locals.

AUOGSP advocates for Joint Ventures.


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Current Situation - Contracts

Contract terms with the local companies are normally shorttherefore not bankable. This stifles their growth, preventing

them from participating in larger projects in the future.

The contracts contain clauses that are ambiguous compared to

the commitment required.

Some contracts are not openly advertised while others receive

bid information earlier than local companies.


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Termination clauses are unfair -

Cancelation with or without reason is aclause in the contract.

Intellectual rights are owned by the oil

companies as per their contracts

Any amount disputed requires a credit

note to be issued regardless whether there

was an agreement or not.

Equipment certification is dependent on

who is holding office at the time.

The multinationals place unfair contract

terms for the local companies.


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What does the law say?

The Petroleum (Exploration, Development & Production)

Act, 2013 (the Upstream Act):

Section 25: 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 are not available in

Uganda, they must be provided by a joint venture company in

which a Ugandan company has a share capital of at least 48%

Licensee to submit to the Petroleum Authority an annual

report on use of Ugandan goods and services.


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Successful Local content Laws

Nigeria - Nigerian Oil and Gas Industry Content Development Act,

2010

Highlights Obligations under the plan

A Nigerian company is defined as a company registered under the

Companies and Allied Matters Act and having not less that 51%

Nigerian shareholding Submission by all companies of a Nigerian Content Plan

Compliance with minimum Nigerian Content specifications

Certain services such as Directional Surveying Services, Cutting Injections/Cutting

Disposal Services, Waste Disposal/Drainage Services and industrial Cleaning Services

requires the use of 100% Nigerian man hours while services such as

Disposal/Distribution and Waste Transport Services, procurement of Sickline, Well Head

Safety Panels and certain Seismic Data Acquisition and Interpretation Services requires

100% Nigerian spend.


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Our Proposals:

There is no clear definition of what local content includes in

the Petroleum Act.

It is recommended that local content be defined as consisting

of, Indigenous Ugandans or companies that are owned and

managed by indigenous Ugandans. A local company should

be well defined.

Local content should be further broken down into 4 key areas:

Employment (at the lower level)

Management (mid level to top level)

Equity (shareholding and ownership of service companies)

Acquisition of Assets and Equipment (from local content)


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More recommendations

Every contract or job must be advertised in the local media with penalties

if this is not done.

Local participation must be correctly weighted.

A list of all contracts awarded should be made available to the

government (this will especially be beneficial for tax purposes). Government agencies such as the Ministry of Energy (PEPD) should do

everything possible to ensure contracts are awarded to local companies.

All contracts in the oil and gas should be signed in Uganda (this ensures

that there is transparency in the process).


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More recommendations

The government should continue to pay for local operators to receive

training and this should be enforced, eliminating this matter will

disadvantage Ugandans.

More stringent monitoring of the multinational oil companies business

practices in Uganda is required. A National Content Board should be

formed to monitor and supervise strict adherence to the rules.

Increase awareness to ensure that indigenous operators are aware of the

opportunities and their rights.

Nigeria compels international companies to have 75% local content

Angola recommends 71% local content inclusion

Uganda 48% local content for those services that cant be locally availed.

We think Joint Ventures will help in transferring skills and technology.


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Successful Local content Laws

Consideration of Ugandan Content in Bid Development; Nigeria isat 40%, Angola 43%, we propose 40%.

Submission of documentation requiring proof of compliance

Expatriate Quota and training of Ugandan Personnel

Research and development Obligations Technology Transfer obligations

Compliance with Insurance, Legal and Financial Obligations

Submission of an annual Uganda

a content performance report

Penalties

Failure to comply incurs a penalty worth 5% of the entire project cost.

Eligibility for awards of licences and permits is also based on compliancewith the Act.


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Peer Review

Nigeria enacted the Nigerian Oil and Gas Industry

Development Act in 2010 and this is what we can pick;

Nigerians given first priority for employment and training for

any project in the sector

Section 35 of the act requires all operators and companies to

employ only Nigerians in their junior and intermediate cadre

Each operator should present a 4 year succession plan on how

Nigerians will fill expatriate position

For award of tender if a Nigerian company is second by has a

differential of not more than 10% ,the contract should be

awarded to the Nigerian Company


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Angola

For competitive bidding, first priority is given to Angolan

companies. Outside bidders have to obtain prior authorization

from the Angolan ministry of petroleum.

Certain goods and services are ring-fenced for Angolans(e.g.

catering, cleaning, transportation, water supply etc)

More specialized services (e.g. geographical and geodesic

surveys, mud logging, drill pad construction and production

facilities etc) may be performed through Joint Ventures with

Angolan companies.


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Ghana

Where bids are otherwise equal, the bid containing the

highest level of Ghanaian content shall be selected

Operators, contractors and sub-contractors within the Oil and

Gas industry shall consider local content as an important

element in their project development and management

philosophy for project execution.


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What we need from Govt

Enterprise development

Capacity buildingFacilitating national participation and

Monitoring and Evaluation

Institutional development


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Opportunities

Catering and food supplies

Security services

Welding and fabrication

Transport of goods and personnel

Warehousing

Camp management

Cold chain management

Hotel services

Recreational and social amenities Logistics supplies like clearing, forwarding and handling

Housing, infrastructure and roads.


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Challenges

The sector is highly regulated

Capital intensive

Standards can not be relaxed to accommodate local business environment.

Risks are very high and therefore funding limited

Competition is so high because of foreign experienced and skilled companies that

know very well these companies.

Lack of a strong local financial policy that supports local investment

Legal and regulatory framework doesnt favor locals.

An investor needs 15 procedures to start a business in Uganda. Kenya (10), TZ (09),

Burundi (04) and Rwanda (2).

You need an average of 33 days in Uganda, Kenya (32), TZ (26), Burundi (08) and

Rwanda (03) to complete start up procedures.


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Ultimately the goal is to buildAfrica, for Africans Obama

Documents

National Participation - Perspective of the Association of Uganda Oil & Gas Service Providers