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In Uganda, Localisation isn’t ‘Ugandisation’

By Denis Yekoyasi Kakembo and Lilian Arinda

A Ugandan company for oil and gas purposes is not one necessarily owned by a majority of Ugandan citizens. A majority foreign owned entity can be a Ugandan company to the extent it is incorporated locally, employs at least 70% Ugandans and uses locally available goods and services.

  1. Introduction

To maximize the participation of local enterprises in the oil and gas value supply chain, Uganda has enacted robust national content requirements that are being enforced to the letter by the Petroleum Authority of Uganda (“PAU”).

The supply of 16 categories of goods and services is exclusively reserved for Ugandan companies. This notwithstanding, there are exceptions within the law subject to the approval of PAU or via commercial structuring where non-Ugandan companies can actually participate in the provision of reserved goods and services as we highlight in this article.

  1. Ugandan company for oil and gas purposes

Reserved goods and services in Uganda’s oil and gas sector as a requirement of the law must be supplied by Ugandan companies. A Ugandan company for oil and gas purposes is not one necessarily owned by a majority of Ugandan citizens.

A majority foreign owned entity can be a Ugandan company to the extent it is incorporated locally, employs at least 70% Ugandans and uses locally available goods and services.

Despite the push by some stakeholders to peg qualification as a Ugandan company for oil and gas purposes to majority shareholding by Ugandan nationals, the rationale of the current definition can easily be understood.

National content is mostly about ensuring that the labour, services and goods being used by the industry are provided from within the country. Locking out foreign investors with the ability to generate domestic capacity for oil and gas contracts to be executed locally would have been adverse to Uganda’s national content aspirations.

What the country would achieve through denying the participation of non-nationals would be “Ugandanising” the sector but not necessarily localizing opportunities accruing from the oil and gas sector.

The reserved goods and services in Uganda’s oil and gas sector are transportation, security, foods and beverages, hotel accommodation and catering, human resource management, office supplies, fuel supply, land surveying, clearing and forwarding, crane hire, locally available construction materials, civil works, the supply of locally available drilling and production materials, environment studies and impact assessment, communications and information technology services and waste management services to the extent possible.

  1. 3. Creation of a joint venture

A foreign company can participate in the supply of reserved goods and services in Uganda’s oil and gas

sector by creating a joint venture (“JV”) that is approved by the PAU with a qualifying Ugandan company.

For the upstream oil and gas subsector, the Ugandan company should have a participating interest of at least 48% in the JV. There is no threshold for participating interest in the JV for midstream oil and gas activities.

The parties seeking the approval of a JV should present an executed JV agreement that has been registered with the Uganda Registration Services Bureau mainly highlighting the scope of work to be performed by either party, the way the Ugandan company shall ably participate financially, technically and personnel wise.

The JV agreement should also explicitly provide for the joint and several liability of the parties. It is also worth noting that the parties to the intended JV should both be registered on the National Suppliers Database (“NSD”) in the case of an unincorporated JV.

If the parties incorporate a joint venture company, it must have separate NSD registration from the JV shareholders. PAU exercises its discretion regarding the approval of the JV guided by the spirit of the law in the applicable National Content Regulations.

PAU is presently very strict with such JV approvals. PAU is likely to approve the JV if it is demonstrated that

the intended partnership amongst others would help the Ugandan company grow its capacity to serve the oil and gas sector in through technology transfer, skills and capacity sharing amongst others.

  1. Approval by PAU

If Ugandan companies including those in joint ventures are unable to supply the required ring-fenced goods and services due to inadequate financial or technical capacity, PAU may authorize the oil companies to use foreign companies to provide goods and services within a period it specifies.

In giving this approval, PAU requires a sourcing evaluation report documenting the inability of local companies to provide the supplies in question. Further, PAU inquires into why the company seeking to provide the supplies in question cannot enter a JV with a Ugandan company and the period for which the supplies in question will be made.

  1. Share acquisition

Via corporate structuring, foreign companies can participate in the provision of goods and services in Uganda’s oil and gas sector by acquiring shares in local entities that already qualify as Ugandan companies for oil and gas purposes.

The acquired entity can then be the vehicle through which reserved contracts for Uganda’s oil and gas sector are executed.

  1. Conclusion

Uganda’s National Content Regulations set out the minimum standards that players in the oil and gas sector must adhere to. The Petroleum Authority of Uganda is strictly enforcing these requirements to ensure that contracts in Uganda’s oil and gas sector are only awarded to eligible entities.

Companies participating in Uganda’s oil and gas sector are however encouraged to go over and over the

minimum requirements as a means of getting their activities and operations embraced by the respective communities in which they will operate.

For support structuring commercial viable tax and legal investment vehicles compliant with Uganda’s national content requirements, please contact your usual Cristal Advocates Advisor.

The writers are with Cristal Advocates.

Reining in the Collapse of The Nigerian Oil Industry

By Austin Avuru

In 1990, Nigeria’s average daily oil production was about 1.85Million barrels and rising, having recovered from a low of 1.3Million barrels in 1983. Oil reserves at the time stood at about 16Billion barrels.

The then Petroleum Minister, Jibril Aminu, a professor of Medical Sciences, announced his intention to, not only replace the increasing production volumes but increase the reserves to 20Billion barrels of oil. He backed up his intention with a definite and measurable action plan … he opened up Nigeria’s deepwater terrain by awarding deepwater blocks (in water depths of more than 200metres) to existing International Oil Companies, like Shell, as well as newcomers like Statoil and Exxon and indigenous companies like Famfa and Allied Energy Resources. New and more generous Production Sharing Contract (PSC) terms were negotiated and approved to govern these deepwater exploration and development activities. At the same time, a new Memorandum of Understanding (MOU) was negotiated and executed (in 1991) with NNPC’s Joint Venture Partners to stimulate further exploration and development activities in the traditional onshore/shallow water terrains. By 2000, deepwater exploration and appraisal activities had discovered some Six Billion barrels of 2P reserves. This, plus incentivized spending and reserve revisions in the traditional terrains meant that, in ten years, we doubled our 2P reserves to 32Billion barrels. Buoyed by this success, the massive interest in the Nigerian Petroleum Sector and the attendant inflow of investment capital, a new target of 40Billion barrels reserves and 4Million barrels of oil production per day was set and captured in the vision 2010 report. Twenty years down the road from the height of our excitement, however, the industry has taken a definite, almost predictable downward slide to the point where our production today is only slightly higher than half of what it was then.

In 2000, an Oil and Gas Industry Implementation Committee (OGIC) was set up by the then Adviser on Petroleum Resources, Dr. Rilwanu Lukman, to carry out a comprehensive review of the industry laws and regulations and come up with a globally competitive regulatory and fiscal framework that would support the planned boost in reserves and production. This was the beginning of our twenty-year journey in producing an appropriate Petroleum Industry Bill (PIB). Four regimes in the intervening period produced four variants of the PIB, in the process creating so much fiscal and regulatory uncertainty that potential investors (and even old and well-entrenched operators within the country) decided to tow the path of extreme caution. Investments dried up. Thus, after the 6 – 8Billion barrels discovered in the first decade of activity, the deepwater stagnated with no additional exploration or appraisal activities, no new discoveries and no new development!

Timipre Sylva, Nigeria’s Minister of State for Petroleum (above): “The current flip-flops on pricing and commercial structure of the gas business cannot stimulate investments in the sector”.

In the meantime, over this period, disruptive crises in the Niger Delta had escalated. Infact, in 2008 and 2016, Shell shut down its entire Western operation for over six months and twelve months respectively. Thus, by the time the PIB was finally signed into law in 2021, two new realities had emerged.

The global advocacy for energy transition from fossil to cleaner fuels meant that International Oil Companies (IOCs), came under tremendous pressure to reduce their carbon footprints and rationalize their fossil fuel investment portfolios. It was, therefore, becoming terribly embarrassing where IOCs that were struggling to justify any additional investments in the Nigerian Petroleum patch were actually being slammed with scandalous judgments and huge fines on environmental pollution cases. Add this to the crisis situation in the Niger Delta with attendant increases in operating costs and huge losses of produced crude oil along the export pipelines, every investment scenario they ran suggested that it was time to divest and leave this terrain. The Petroleum Industry Act (PIA) had become irrelevant in the face of these new realities.

With eyes fixed on divestments and exit, the IOCs have not made any meaningful investments in the last fifteen years. The result has not just been declining production. Much worse, the entire export pipeline network has been surrendered to vandals and illegal bunkerers. Thus, the phrase “Crude theft” which crept into the industry about 2010 has taken on a new meaning. There are some pipeline systems now (particularly in the East) where 80% (eighty per cent) of production injected therein does not make it to the terminal! Almost every producer is now cooking up “alternative evacuation” schemes that cost four to five times what pipeline export would normally cost!

The stark reality today is that the IOCs are leaving. Their decision to leave is outside our control as a nation. In fact, over the last twelve years, Shell and Chevron have divested from a total of twenty-one blocks. It is now public knowledge that Shell, and ExxonMobil are now exiting the onshore/shallow water altogether. In fact, my projection is that, by Christmas day of 2025, TOTAL would be the only IOC in J.V with NNPC.

The situation is the same with domestic gas delivery. Even though we are weaving all the right slogans about the future of gas in Nigeria, in the past five years, I can only point at a couple of Nigerian independents who are investing in gas development and processing for the domestic market.

NNPC Towers in Abuja, ‘headquarters of the Nigerian oil industry’: Just standing back and intervening by pre-emptive acquisitions cannot be a sustainable solution to the question of retreating IOCs

The state of the Nigerian Petroleum Industry is a National Emergency. Oil production is down to about 1.4Million barrels per day and declining and this includes about 600,000BOPD from the deepwater. Domestic gas production has stagnated at about 1.2Billion cubic feet (Bcf) per day over the past five years at a time when projected production should have been 3.5Bcf per day. The collateral impact of course, is the low level of power generation which itself has stagnated at about 4,000Mega watts per day since 2015.

So, what do we do?

The full impact of the current oil production level can only be imagined when oil prices return to the $60 per barrel level. I dare repeat that the situation has to be treated as a national emergency.

Between the upstream regulator (the commission) and NNPC, they need to set up a “war room”, some form of an effective task force to develop a blueprint for returning the industry to full bloom. The responses we hear today to the myriad of problems outlined above have been ad-hoc, knee jerk and in some cases only self-serving. Here is a guide to issues that must be addressed.

  • When IOCs leave a matured petroleum patch, independents, whether local or international, usually move in to inject fresh capital, run a nimble efficient operation and maximize production and reserves addition. A well-organized transition driven by a clear policy direction, from the retreating IOCs to a crop of efficient independents with the requisite resources will have to be implemented. Just standing back and intervening by pre-emptive acquisitions cannot be a sustainable solution proffered by NNPC.
  • There has to be a deliberate policy-driven return to the traditional onshore/shallow water terrains. Eighty per cent of our remaining reserves are still in this belt. To do this, we have to address the twin problems of reliable pipeline evacuation and community restiveness. These problems have become heightened, not because there is no solution, but because we have abandoned every attention to them in the last fifteen years. When these two problems are tackled, plus a strict application of the “drill or drop” provisions of the new PIA, huge investments in drilling and facilities revamp will flow again into this terrain.
  • Finally, we have to match our gas slogans with effective, measurable, policy actions to drive investments in domestic gas supply. The current flip-flops on pricing and commercial structure of the gas business cannot stimulate investments in the sector.

This industry will not wake up by God’s miracle. We have to wake up and design the stimulant that will revitalize it.

Austin Avuru

March 15, 2022

Avuru, Founder/ Executive Chairman AA Holdings and Vice Chairman Platform Petroleum, was the founding Managing Director/CEO of Seplat Energy. He is he author of two books: Politics, Economics & the Nigerian Petroleum Industry (Festac Books, Lagos, 2005) and My Entrepreneurship Journey (Radi8, Lagos, 2022).


African Energy Chamber Launches New Energy Jobs Portal

The platform will assist local and international companies in attracting local talent across 30 different skills set in the oil & gas, power and renewable energy sectors

The African Energy Chamber says it has launched a free-of-access jobs portal “in order to maximize the saving of local jobs and assist in the recovery of African energy markets after the COVID-19 crisis,”.

The Chamber says the portal it created with its partners is  for trained and qualified African workforce. “The collaborative platform is accessible at and relays the latest jobs opportunities for Africans across the continent’s energy markets”.

The platform will assist local and international companies in attracting local talent across 30 different skills set in the oil & gas, power and renewable energy sectors. All energy companies operating in Africa are able to post their job offers for free, and these will be relayed on the platform and via the Chamber’s communications channels after approval by the Chamber’s admin and team. The jobs portal will be operated and maintained by the African Energy Chamber in order to avoid all fraud and guarantee the credibility of the offers available.

“Local content has always been the number one priority of the African Energy Chamber when advocating for an energy industry that works for Africans and builds truly sustainable business models. With this new platform, we are getting rid of a lot of entry barriers set on the job market by expensive recruitment agencies. This initiative of the Chamber is non lucrative and we encourage all African and international companies to work with us on boosting local jobs creation to support the recovery of our industry and build true sustainability,” declared Nj Ayuk, Executive Chairman at the African Energy Chamber.

Nigeria Increases Intervention Fund for Local Content Financing

The Governing Council of the Nigerian Content Development and Monitoring Board (NCDMB) has approved the expansion of the Nigerian Content Intervention Fund from $200Million to $350Million.

The enlargement of the Fund by $150Million was part of the decisions taken at the recent NCDMB Governing Council meeting, which held virtually on June 16, 2020. The meeting was chaired by Timipre Sylva, the country’s Minister of State for Petroleum Resources and Chairman of the Council.

The Council approved that $100Million from the additional funds would be deployed to boost the five existing loan products of the NCI Fund, which include manufacturing, asset acquisition, contract financing, loan refinancing and community contractor financing.

The Council also approved that $20Million and $30Million respectively should be deployed to two newly developed loan product types – the Intervention Fund for Women in Oil & Gas and PETAN Products, which include Working Capital loans and Capacity Building loans for PETAN member companies.

PETAN is Petroleum Technology Association of Nigeria, a body of Nigerian owned oil service engineering contracting firms.

The NCI Fund was instituted in 2017 as a $200Million Fund managed by the Bank of Industry (BoI), engaged to facilitate on-lending to qualified stakeholders in the Nigerian Oil and Gas industry on five loan product types. The NCI Fund is a portion of the Nigerian Content Development Fund (NCDF), aggregated from the one percent deduction from the value of contracts executed in the upstream sector of the oil and gas industry. About 94 percent of the NCI Funds has been disbursed to 27 beneficiaries as at May 2020.  NCDMB has received new applications from 100 companies for nearly triple the size of the original fund.

Guidelines for the NCI Fund provide that beneficiaries of the Manufacturing Loan and Asset acquisition Loan can access a maximum of $10Million respectively. Beneficiaries of Contract finance Loan can access $5Million while beneficiaries of the Loan Re-financing package can access $10Million, with beneficiaries of the Community Contractor Finance Scheme limited to ₦20Million.

The maximum tenure for all loan types is 5 years and applicants cannot have two different loans running simultaneously.

At the onset of the Fund, the applicable interest rate for the various loan types was pegged at eight (8) percent, except the Community Contractor Finance Scheme, which was five (5) percent.

However in April 2020 as part of NCDMB’s response to mitigate economic impact of the coronavirus pandemic, the Governing Council approved reduction of the interest rate from eight (8) to six (6) percent per annum for all four of the loan products. The Board also extended the moratorium for all loan products.


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