Ugandans Not Ready For Oil

As oil companies, CNOOC, Total and Tullow move closer to oil production, participation of Ugandan has been found to be below the required standards. A National Local Content Baseline Survey conducted by the three companies has revealed that transportation and logistics, hazardous waste management, light equipment manufacturing, road construction and mechanical construction standards, were far below the required oil and gas standards.

While unveiling the findings, Jimmy Mugerwa, the General Manager Tullow Oil noted that Ugandan companies were not yet ready to get the bulk of the jobs to meet the needs of oil companies and refinery construction.

The warning is that if Ugandans are not yet ready, almost all goods and services will end up being imported, leading to repatriation of profits. For local companies that took opportunities in the early phase, the returns have been good. For instance Tullow revealed that contracts in excess of 300 million United States Dollars have been issued to 600 local enterprises.

For the next phase, the value of contracts is likely to even be higher as demands from oil companies grow. The findings point to the potential of close to 130,000 direct jobs being created for the first three years prior to production. Most of the jobs, about 80 percent were noted to be short term and would later average 3,000 when the sector finally moves into the production phase.

Indirectly, there are also close to 150,000 jobs likely to be created as a result of oil and gas activities. Notably at least 60 percent of all jobs will go to technicians and craftsmen. Vincent Nicolini, a local content manager at Total E&P noted that the findings were based on the demands of the industry for the next level of the oil production survey.

There is potential investment of about 12bn United States Dollars after all production licenses have been issued. Nelson Ofwono, the National Local Content Manager at Tullow Oil noted that in some areas like cement manufacturing, security, fuel wholesale and reinforcement steel manufacturing, the oil and gas standards have been met. The oil companies have come under criticism previously from the Association of Uganda Oil and Gas Suppliers for placing stringent standard rules on them, eventually denying them lucrative contracts in favor of foreign companies.

Additionally, the Office of the Auditor General is said to have halted an oil company from bringing into the country an expatriate nurse, yet Uganda has locally certified and qualified nurses. Jessica Kyeyune, the national content manager at CNOOC says for there to be full benefits for nationals, the oil companies are not the only ones responsible for making sure this happens.

The survey points out education of Ugandans should mostly focus on the areas of civil construction, electrical and mechanical fields. The oil companies also committed themselves to establish an “Enterprise Enhancement Center” to provide information on tenders, and identify opportunities and also the required standards for Ugandan companies. When Uganda discovered commercial quantities of oil in 2006, a National Oil and Gas Policy was formulated. The policy states in one of its objectives, to promote local participation at all levels of the oil production cycle.

An oil well undergoes testing in the Lake Albertine region of western Uganda in this 2010 file photo. (AP / Monitor Publications Ltd)
An oil well undergoes testing in the Lake Albertine region of western Uganda in this 2010

The government did commission a study in 2010 on how nationals could benefit. One of the recommendations was for the country to come up with a National Local Content Policy, which is currently being drafted. Bernard Ongodia, Senior Geologist at the Petroleum Exploration and Production Department (PEPD) on the Ministry of Energy defended the pace at which the policy was being drafted.

One of the proposals in the draft policy is to put in place specific goods and services where Ugandan companies will be given a priority over international companies. As Uganda waits for the policy, the first production license was issued in September 2013 to CNOOC for the Kingfisher discovery area in Buliisa District. The concern is with first commercial oil expected in 2018, according to Jin Wein, the CNOOC Vice President; the capacity of nationals is not being developed fast enough.

Additional reporting from URN

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