This paper discusses the internationalization of the petroleum industry as witnessed within Uganda’s petroleum legal and regulatory framework, drawing heavily on the Host Government Contracts (HGC). The country is selected for a number of reasons. First, the framework relates strongly with the other countries across East Africa, a region that is profoundly becoming a new petroleum frontier.1 Second, Uganda’s commercial oil discoveries realized in early 2006 have since increased to become the largest on- shore oil reserves in the Sub- Sahara Africa (SSA) over the last 20 years.2 Third, this ‘black gold’ potential has seen strong foreign interest, especially over the last ten years with country now pitted to become a top- 50 oil producer in the mid- term if the development plan is achieved.3 As a result, the country has witnessed legal, regulatory and policy reforms; strongly over the last ten years, aimed at improved management of the nascent industry as shall be discussed.
The paper is structured as follows. In the first section, a chronological development of country’s petroleum legal, regulatory and policy framework is discussed. Section two explains the HGC that has been employed in Uganda to manage its hydrocarbon resources. In the third section, internationalization of the industry as reflected in Uganda’s framework is considered. Although the focus is on host government contracting, the interdependence with the public law framework that governs it is appreciated. For this reason, the discussion permeates beyond the HGCs to include this framework. While it is adduced that internationalization within Uganda’s legal system is apparent and still progressing, the paper suggests that developing countries face some specific challenges. In the last section, these challenges are assessed along with recommendations to remediate them, and entrench this narrative.
2. Legal Background to Uganda’s Petroleum Sector
Preliminary petroleum exploration in Uganda dates back to the early 1920s when the protectorate Government geologist E. J Wayland, documented presence of hydrocarbons in the Albertine Graben Ð the present day sole proven hydrocarbon province.4 Intermittent activities proceeded through to the early 1940s, when work was halted in the wake of World War II and its aftermath. With the precarious political environment that followed, consistent activities did not resume until the early 1980s when comprehensive aeromagnetic survey across the province was conducted.5 This was followed by the World Bank project that embarked on exploration and further understanding of the Graben sub- surface in the late 1980s. This set of activities necessitated the enactment of the regulating legislation - the Petroleum (Exploration and Production) Act, Cap 150, of 1985 Ð laws of Uganda.6
While this Act laid emphasis on exploration operations, it was not comprehensive on production and other matters incidental such as decommissioning activities.7 More so, there was no policy and regulatory framework in place to actualize the Act. At the same time the Act had some incoherencies with the Constitution. For instance, while the Act explicitly dealt with petroleum, under the Constitution, petroleum was considered a “mineral” whose definition was referred to the existing Mining Act of 1964, which excluded petroleum.8 Notwithstanding, the Government of Uganda (GoU) signed the first ever Production Sharing Agreement (PSA) with Petrofina from Belgium in 1991 where the latter took over the entire Albertine Graben to perform further exploration work. However, given the underlying inadequacies, this PSA was a dead letter, as the licensee did not carry out any work until its expiry in 1993, and was not renewed.9
As a remedy to the regulatory and institutional framework inadequacies, the Petroleum (Exploration and Production) Regulations were passed in 1993 by the newly created Petroleum Exploration and Production Department (PEPD) within the Ministry of Energy and Mineral Development (MEMD).9 PEPD was formed from a small petroleum unit under the Mineral and Geology Department signifying the initial institutional reform for the sector. These reforms were followed by the promulgation of a new national Constitution of 1995. Article 244 of the new Constitution was fundamental in closing the lacunas in the legal framework as it explicitly provided for minerals and petroleum. It created a fundamental shift where the applicable laws at the time were harmonized with the existing law and regulations. Over this period, limited work happened, until in 1997 when the second PSA was signed between the GoU and Heritage Oil and Gas Company from UK (Heritage Oil) for one of the nine exploration areas of the Graben.
A year later, Energy Africa (now Tullow Oil) from Ireland came on board, followed by Hardman Resources from Australia in 2001. The three International Oil Companies (IOC) largely participated
1 KPMG, 'Oil and Gas in Africa: Africa's Reserves, Potential and Prospects', (2013), p.18
2 B. Shepherd, 'Oil in Uganda: International Lessons for Success', (London: The Royal Institute of International Affairs, Chatham House, 2013), p.2
3 KPMG, 'Oil and Gas in Africa: Africa's Reserves, Potential and Prospects', (2013), p.16
4 'Kashambuzi, R. & Mugisha, F.; Exploration History and Petroleum Potential of Uganda', Petroleum Exploration and Production Department (PEPD), Government of Uganda (GoU), ([Accessed September, 8 2013]. Available from: http://www.energy.eac.int/eapc2003/contents/22a.pdf
6 PEPD. (2013). “Petroleum Potential of the Albertine Graben.” [Accessed September 26, 2013], from http://www.petroleum.go.ug/uploads/PEPD Brochure November%202008.pdf
7 Arthur Bainomugisha, and Benson Tusasirwe, 'Escaping the Oil Curse and Making Poverty History. A Review of the Oil and Gas Policy and Legal Framework for Uganda', (ACODE Policy Research, 2006), p.22- ‐26
9 PEPD, 'The History and Progress of Petroleum Exploration and Development in Uganda.'2014) <http://www.petroleum.go.ug/page.php?k=abthistory > [Accessed September 24, 2013].
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- internationalization uganda’s host government contracting