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UGX 7 Trillion Approved For Ugandas Firms In Oil and Gas Sector :: Uganda Radionetwork

UGX 7 Trillion Approved For Ugandas Firms In Oil and Gas Sector

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The Authority’s Manager of Corporate Affairs, Gloria Sebikari anticipates a surge in contract numbers once construction of the East African Crude Oil Pipeline (EACOP) takes off.
21 Mar 2024 13:37
Ernest Rubondo. The Authority says it is reviewing some of its regulations to ensure the companies comply
The Petroleum Authority of Uganda (PAU) says it has sanctioned contracts valued at approximately USD 7.16 billion since the Final Investment Decision (FID) was taken in February 2022. 

It reveals that about $1.8 billion or seven trillion shillings worth of contracts has been allocated to Ugandan companies. Those contracts according to PAU are currently in various stages of execution in the Tilenga and Kingfisher under the Lake Albert Development Project located in the Albertine Graben.      

The Authority’s Manager of Corporate Affairs, Gloria Sebikari anticipates a surge in contract numbers once construction of the East African Crude Oil Pipeline (EACOP) takes off.

. “Most of the contracts awarded thus far are in the upstream sector, but we expect an increase in both the number and value of contracts for Ugandan firms once EACOP enters full-scale construction." Said Sebikari.

She revealed that the Authority is updating its National Suppliers Database (NSD) as part of the efforts to open up the sector to Ugandan entities. Sebikari urged entities and individuals interested in supplying goods and services to the sector to register. In February 2024, 113 entities applied, comprising 97 Ugandan entities and sixteen foreign entities. 

The National Suppliers Database (NSD) is published annually on the Authority’s website, and companies are required to renew their registration every three years.  The National Suppliers Database (NSD)  2024 currently has over  3,000 qualified entities with 2,389 Ugandan and 612 Foreign. 

Over 360 companies have been awarded contracts directly from the licensed oil companies (Tier 1 contractors), with 300 of these being Ugandan entities, accounting for 83% of the total. 

Additionally, more than 1,400 companies have secured contracts from the Tier 1 contractors (Tier 2 subcontractors), while several others were engaged at the Tier 3 level. Director Economic and National Content Monitoring at PAU, Peninah Aheebwa emphasised the prioritisation of National Content with a focus on value retention.  

“We aim to retain as much value as possible within the country. In instances where Ugandans lack the requisite skills and experience, we encourage them to form Joint Ventures (JVs) to compete for contracts at various project development stages. A total of 120 such joint ventures were reviewed and 54 (45%) have been approved by the PAU to undertake several contracts awarded. The cumulative value awarded to JVs since the announcement of the FID stands at US$260 million.” Said Aheebwa.

Regarding employment, the sector currently employs 13,067 individuals, with 11,752 (90%) being Ugandans. Licensees directly employ 1,018 persons, of whom 68% are Ugandans, while contractors and subcontractors employ 12,049, with 92% being Ugandans, including 4,442 from local communities. In addition, 554 small and medium-term enterprises have received training from the PAU on identifying and participating in business opportunities in the oil and gas sector since 2021. 

This was under a US$ 500,000 Business Linkages Project undertaken in partnership with the African Development Bank (AfDB) and implemented the EACOP districts of Mubende, Kyankwanzi, Masaka, Kyotera, Sembabule, Kikuube, Rakai, Hoima, Gomba, and Kakumiro districts.

The challenges encountered in implementing national content the country’s oil and gas sector include limited skilled manpower in some professions and enterprises, inadequate affordable and patient capital, extended payment periods, and geopolitical tensions affecting supply chains.

According to Aheebwa, the Authority is engaging relevant stakeholders to ensure compliance with the legal requirements, payment of arrears for contractors, and enhancing the skills of individuals and enterprises.   She said the regulatory framework is also being reviewed to ensure it provides deterrent measures to emerging issues like delayed payments, among others. 

There were reports that some of the companies contracted in the oil and gas sector were defaulting on National Social Security Contributions. Some workers have also reported labor-related concerns like working without being granted leave.

The banking and finance sector is also working with industry players to address the challenges related to inadequate capital. Aheebwa reaffirmed PAU's commitment to enhancing national participation in Uganda’s oil and gas activities and collaborating with all stakeholders to ensure value creation and retention from oil and gas activities in the country.