Ugandan lawmakers urge govt to set template for oil deals

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An influential Ugandan parliamentary committee has called for a model oil production sharing agreement to stop the government from being short-changed, a move pressure groups say could curb corruption and create benchmarks by which to judge the quality of future deals.

The east African country wants to enter the ranks of the world’s top-50 crude oil producers after striking commercial hydrocarbon deposits in the Albertine rift basin in 2006.

But the Ugandan oil project has been dogged by delays as the government and oil companies bicker over contracts and six years after discovering oil deposits the country is still some way off commercial extraction of hydrocarbons, Reuters reports.

The parliament’s natural resources committee (NRC) report, seen by Reuters on Wednesday, said the draft bill should include clauses to require development of a model PSA “to guide contract negotiations to avoid bad deals for the country.”

The report added: “Any future agreements shall comply with the provisions of the model agreement.”

Michael Werikhe, chairman of the NRC, said a model PSA could lead to a standardisation of a range of issues, including government share of oil and royalties.
“It’s about establishing specific benchmarks on all the key aspects of a PSA to act as a sort of a template for future deals,” he said.

Previous Ugandan PSAs were negotiated on a case-by-case basis, and this allowed individuals involved to determine terms arbitrarily, according to Winifred Ngabirwe, chairman of Publish What You Pay, an oil industry transparency pressure group.
“That creates potential for corruption,” he said. “A model contract that would spell out standard parameters on key things like government share of oil, taxation, dispute resolution and suchlike would immensely diminish that potential.”

Parliament is due to start debating the NRC’s report and the bill is expected to pass by the end of this year.



But advocacy group Global Witness warned the proposed PSA does not go far enough in taming the far reaching powers of the Ugandan executive.
“Too much power will rest with the minister, and therefore the executive, which risks politicising the management of the petroleum sector,” Global Witness said in its analysis of NRC’s report on the draft bills.