Recommendations for Uganda's Petroleum Bills

Uganda's parliament is currently reviewing three pieces of legislation that could have a major impact on how the country manages its oil sector:

• The Petroleum (Exploration, Development and Production) Bill, 2012, which will govern upstream petroleum activities, including procedures for licensing, environmental safeguards, transparency rules and the government's institutional set-up;
• Part VII of the Public Finance Bill, 2012, which spells out procedures for petroleum revenue management; and
• The Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill, 2012, which will govern downstream activities.

Download: Comments on Uganda Petroleum (Exploration, Development and Production) Bill, 2012 (424kb) Potential Institutional Structures for Oil Administration in Uganda (79kb) Comments on Petroleum Revenue Management in the Draft Ugandan Public Finance Bill 2012 (676kb)

Revenue Watch, together with the International Senior Lawyers Project and the global law firm Skadden, Arps, Slate, Meagher & Flom, analyzed the Petroleum (Exploration, Development and Production) Bill to help provide international context to the debate in parliament and across Uganda.

The bill takes several steps that improve upon a draft circulated in 2010, including clarification of the role of the new Ugandan Petroleum Authority, some improved language on public reporting and transparency and more competitive licensing procedures. But as Ugandan parliamentarians and citizens consider the 2012 bill, we recommend that they pay close attention to several outstanding issues, including weak accountability provisions for the national oil company created by this bill, overly broad confidentiality provisions, broadly defined exceptions to the mandate for competitive license bidding, and problems with the timing of requirements for social and environmental impact assessments and decommissioning funds.

In addition to the full analysis of the bill (pdf), RWI has developed a short note (pdf) outlining the potential advantages and disadvantages of the institutional structure proposed in the bill for upstream oversight, as well as two possible alternative structures.

RWI also analyzed (pdf) Part VII of the draft Ugandan Public Finance Bill, which proposes a number of mechanisms to manage Uganda's petroleum revenues, including a petroleum fund and a petroleum investment reserve, both intended to provide a share of oil revenues for future generations.

The current draft of the bill meets basic transparency requirements and prohibits the collateralization of oil revenues, but departs from international good practice for oil revenue management in other ways. To ensure that oil revenues contribute to Ugandan development, we recommend that the bill creates: a mechanism to address oil revenue volatility and smooth public expenditures; clear rules and guidelines for investing the proceeds of oil for growth and sustainable development; strengthened transparency and oversight rules to ensure oil is managed in the interest of all Ugandans; and a widely accepted rules-based, predictable and transparent revenue sharing regime.

Patrick Heller is RWI senior legal advisor.