Ugandan Parliament proposes model PSAs for future oil deals
BY NICHOLAS BARIYO
KAMPALA, Uganda--Uganda's natural resources committee has proposed the introduction of a model Production Sharing Agreement to guide future oil deals as the country attempts to revamp its oil legislation ahead of planned oil production, officials said Tuesday.
According to Michael Werikhe, the chairman of the parliamentary panel, a model PSA would guide contract negotiations between government and prospective investors and help guard the country from entering into bad deals.
"A model agreement..shall guide negotiations of any future agreements..and shall comply with the provisions of the model agreement" the panel said in a report, on the Upstream Petroleum Bill.
The panel has been deliberating on the bill since February and its recommendations are expected to be discussed in parliament this week, ahead of the adoption of the long awaited oil laws. When passed, Uganda is expected to issue international tenders for the licensing of the remaining 5 oil blocks in its oil-rich Lake Albertine rift basin, as well as up to 10,000 sq km of relinquished acreage from the existing players.
Analysts and activists have in the past accused government of dealing secretly with oil companies, a situation that leads to entering into bad oil contracts that benefit more the oil companies than the country.
U.K.-based Global Witness hailed the proposed model contract but said that the panel stopped short of recommending additional powers for parliament, including determining the proposed model contracts.
"Rather than simply requiring that the Minister to present information to the Parliament, the laws could be amended to require MPs to approve model contracts" Global Witness said in a statement Tuesday.
Uganda is currently embroiled in a legal spat in London with Heritage Oil emanating from the capital gains tax levied on its $1.45 billion sale of its interests in the country to Tullow Oil in 2010. Government's attempts to have the tax spat resolved by local courts collapsed allowing the company to successfully refer the dispute to London citing stipulations in its contract.
With a model PSA contract, government would avoid such deals, according to Winfred Ngabirwe, the executive director of Ugandan-based Global Rights Alert.
Companies with oil licenses in the country include Tullow, Total S.A., China's Cnooc Ltd. and Dominion Petroleum Ltd.
Uganda has discovered at least 1.8 billion bbl of oil and the country is preparing to start exploiting its oil fields in the next few years.
Dow Jones Newswires