Report / March 2, 2012

Uganda's oil laws: Global Witness Analysis

As Uganda’s draft oil laws are presented to Parliament, a Global Witness analysis of the legislation highlights the need for greater environmental, social and transparency provisions.

Uganda has recently discovered oil reserves that have the potential to double the government’s revenue within six to ten years, worth an estimated US$2.4bn per year.

To manage the industry, the Government of Uganda has recently introduced two petroleum bills to the Parliament. Every clause in this new legislation is potentially crucial for the future management of the country’s petroleum assets. Between them, the Bills will set the parameters for how the country’s oil sector will be governed, covering the allocation process, transportation and refinement and how revenues from the sale of oil will be managed.

The Bills are currently being considered by the Parliamentary Committee on Natural Resources, which will have 45 days to look at each piece of legislation from the day of receipt. After this, the Bills will return to Parliament for second reading, and at this stage they can be passed into law.

Global Witness welcomes the introduction of the Bills and congratulates the Government on its efforts to bring in sound legislation to govern the industry. However, while the Bills display a number of positive aspects and some good detail, there are still big gaps. Many of the concerns raised in response to the last draft Bill in May 2010 are not addressed. Tight ministerial control, absence of parliamentary oversight and a lack of guarantees on contract and financial transparency remain key features of both Bills. The legislation will need to be carefully considered and substantive amendments made if it is to meet international best practice and provide a solid foundation for Uganda’s petroleum sector.

The top five Global Witness recommendations are:

1. Reduce direct ministerial discretionary control of the sector by:

  • Strengthening the independence of, and better defining, institutions and their roles.
  • Leaving less to secondary regulations and contracts, and ministerial discretion.
  • Clarifying what kind of system the GoU will use for partnering with international companies and provide further information about this process.

2. Provide a strong role for Parliament in the management of the petroleum sector by giving them the explicit power in the legislation to approve new acreage, regulations, licences and contracts and play a greater oversight role. Consider other oversight bodies.

3. Commit to making all documents relating to the petroleum sector public unless they fall within tightly and specifically defined exemptions.

4. Commit the GoU to financial transparency in the management of petroleum revenues and bidding processes. Present revenue management legislation to be considered alongside these two Bills, before passing them into law.

5. Commit to, and set out a process for, careful consultation with all relevant stakeholders at each stage of petroleum development. This could include licence allocation and renewal, drawing on the free, prior and informed consent model of best practice.