Leaked Ugandan oil contracts will put more in state coffers but could leave people and environment at risk

Campaigners call for ‘Open Contracting’

Ugandan oil contracts seen by Global Witness show the Government has got a better financial deal for the country’s oil but has failed to put in place crucial environmental and human rights safeguards, said Global Witness as it published the documents for the first time today.

With a new licensing round expected in Uganda in 2015, Global Witness has published the first analysis of two ‘Production Sharing Agreements’ (PSAs) signed by the Ugandan Government and Tullow Oil in February 2012. The contracts also govern Total and the China National Offshore Oil Company (CNOOC), who are in partnership with Tullow. While the Government has secured more money and better financial terms from the companies, it has kept the contracts hidden from citizens and failed to include robust measures to protect them or their environment, according to Global Witness.

“Citizens need to know how their resources are being managed and how it affects them – that’s why we’ve published these contracts. Contract transparency in the oil, gas and mining sectors is accepted best practice; the Government of Uganda should publish all contracts, existing and future. It is undemocratic not to,” said George Boden of Global Witness.

“The good news is the contracts represent a better financial deal for Ugandans, but the benefits could be lost through failing to protect people and their environment. Much more needs to be done to protect the Albertine Rift, which is home to half of all species of African birds and more than a third of the continent’s mammal species.” said Boden.

Global Witness is also publishing the economic modelling tool it used to calculate the potential financial outcomes of the deals in question, so that citizens of Uganda and other oil-rich countries can use it to make their own assessments of their governments’ contracts and hold them to account.

Unlike those signed before 2008, the 2012 contracts contain:

• The ability to pass stricter environmental and social protection measures without fear of financial compensation claims from the companies.
  
• A new tax on oil worth hundreds of millions of dollars in potential additional revenue.
  
• A commitment by companies that they will pay capital gains tax, and that tax disputes will be dealt with in Uganda, not in international arbitration.
  
• The ability to introduce new taxes on higher than expected company profits resulting from higher oil prices.
  

However, Global Witness’ analysis shows the contracts and oil laws leave significant weaknesses when it comes to protecting people and environment.

• Oil drilling is taking place in national parks and wildlife reserves without sufficient protections in place.
  
• Community consultation provisions are inadequate, there is no provision for resolving disputes with communities and compensation requirements are weak.
  
• There are no clear procedures for dealing with hazardous waste from the oil sector.
  
• There is no mention of human rights in the contracts or the laws.
  
• The Government could end up paying for the cost of decommissioning and restoring land.
  
• The Government agencies tasked with managing the emerging oil sector are woefully under-resourced and under-prepared.
  
• Cost recovery provisions could leave the Government paying bills for company lawsuits in disputes with communities affected by the oil sector.
  

There is a chance for Uganda to fix these problems by including improved terms in the new model contract and regulations which the Government is currently drafting. This analysis, and the publication of the contracts themselves, will help inform that process. The Government should open up the sector to far greater scrutiny, and put in place much stronger provisions to protect people and the environment before considering whether or not to open up further areas for oil exploration.