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Oil and Gas

Covering Uganda’s Big Oil Debate (Part II)


Ugandan newspapersAfter two dramatic days of debate on Uganda’s oil sector, Parliament passed several resolutions before going back on recess.

The media have by and large reported the resolutions accurately. However, in a couple of cases, some journalists have got it all wrong. I suspect this is because they didn’t pay attention to the amendments that were moved on some of the original resolutions.

For instance, Daily Monitor has twice reported, on Wednesday and today, that Parliament resolved that the government “withholds consent to a pending transaction between Tullow Oil, Total and CNOOC before capital gains tax assessed by the tax body Uganda Revenue authority payable by Tullow are paid in advance and a report to that effect be made to Parliament.”

However, Resolution 10 was in fact amended after some members argued that the last part –on capital gains tax was redundant. The argument was how do you talk about capital gains tax assessed when the transaction has been halted?

The amended resolution therefore read: “Government withholds consent to the [pending] transaction between Tullow Oil Uganda Limited and CNOOC and Total until all relevant laws are put in place.”

Today, The New Vision reports, in the front page story “Tullow reacts to bribery allegations”, that MPs “called for a commission of enquiry headed by a judge of the Supreme Court to investigate claims and allegations of bribery and corruption.”

Again, this was the resolution in the original motion. It was amended by Wakiso Woman MP Rosemary Sseninde who moved that Parliament should set up an ad hoc committee instead. It was her amendment also that saw the inclusion of part b to this resolution—calling for the ministers and government officials named in the bribery and corruption allegations to step aside until investigations are completed.

I also noticed some inaccuracies in the way President Museveni’s press conference remarks about Production Sharing Agreements (PSA) were reported by some media outlets. The correct position is that under the PSA route, if a company that has been granted exploration rights fails to find oil, it suffers the loss alone. If, on the other hand, the company makes a viable oil find in a given Exploration Area [EA), and goes ahead with production, the revenue from that would be shared with the government according to an agreed formula. This revenue would exclude so-called recoverable costs or “cost recovery oil”. This is the money that the company would have invested in the exploration, development, and production of the oil. It also includes operating costs. It should be noted that according to the current PSAs in Uganda, recoverable costs will also be applied to exploration of wells that turned out to be dry (without oil). So if Tullow Oil drills 10 wells in Exploration Area Z and finds oil in only eight wells, it will still recover the costs for drilling in the two dry wells. While civil society organisations find this arrangement questionable, senior ministry of energy officials argue that Uganda agreed to such terms as an incentive to attract investors in the oil sector at a time when many big international players had stayed away from us.

Finally the media could do some more work on the providing depth, especially explanation.

For instance, it would also have been great if from the very beginning the media made it clear what parliamentary resolutions mean. Are they binding? What are the risks for the Executive if they ignore the resolutions? Can parliamentary resolutions annul agreements that have been signed already?

In the same breath, there has been a lot of excitement about Ministers Sam Kutesa, John Nasasira and Mwesigwa Rukutana “stepping aside”. But what does stepping aside mean? Is it the same thing as resignation (I don’t think so), as some media outlets have reported? Is it the same thing as quitting (again, I don’t think so)? Does it mean they continue holding their portfolios, but simply don’t report to office or attend cabinet meetings (my addition) as Rukutana suggested in an interview with Daily Monitor? Do they continue to be paid and to enjoy all the perks associated with their offices? Can the president appoint other ministers to replace them? Of course common sense would suggest that perhaps the President can’t replace the ministers before the court case is disposed of, but it doesn’t hurt to explain these issues to audiences. We could also draw from recent experiences in neighbouring Kenya where ministers who had stepped aside, in the wake of abuse of office allegations, went back to Cabinet after they were cleared by investigations.

About the Author: Dr. Peter Mwesige is Executive Director of the African Centre for Media Excellence (ACME). He has chaired the department of journalism and communication at Makerere University and is a former Executive Editor of the Monitor in Kampala.

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