The Independent Uganda: You get the Truth we Pay the Price
Limited skilled manpower, inadequate financing, extended payment cycles, and geopolitical tensions continue to impact the sector a head of oil production
Kampala, Uganda | THE INDEPENDENT | Following the Final Investment Decision (FID) announcement in Feb, 2022, the Petroleum Authority of Uganda (PAU) has approved contracts worth US$7.16 billion in the ongoing oil and gas development projects.
PAU said in a statement on March.21 that local companies have been awarded nearly US$1.8 billion (equivalent to Shs7 trillion) of these contracts, which are at various stages of execution ahead of production.
Gloria Sebikari, the corporate affairs manager at PAU said they anticipate a surge in contract numbers once the construction of the East African Crude Oil Pipeline (EACOP)begins.
“The majority of contracts awarded to date have been in the upstream sector. However, we foresee a substantial increase in opportunities for Ugandan companies with the commencement of full-scale construction of EACOP,” she said.
She said in a move to optimize the benefits derived from the burgeoning oil and gas sector, PAU is in the process of updating its National Suppliers Database (NSD), encouraging local and international entities interested in supplying goods and services to the industry to register.
Last month, the supplies database saw applications from 113 entities, including 97 from Uganda and 16 from abroad. The NSD, which is annually published on the Authority’s website, requires companies to renew their registration triennially. Currently, the 2024 NSD boasts over 3,000 qualified entities, with 2,389 being Ugandan and 612 foreign.
So far, over 360 companies have directly secured contracts from licensed oil firms (Tier 1 contractors), with Ugandan entities making up 83% of this total. Moreover, approximately 1,400 companies have been contracted as Tier 2 subcontractors, with additional engagements at Tier 3 level.
Peninah Aheebwa, the director of Economic and National Content Monitoring at PAU said the Authority is dedicated to prioritizing National Content and maximizing domestic value retention.
“We aim to retain as much value as possible within the country,” she said, encouraging Joint Ventures (JVs) among Ugandans lacking specific skills and experience as a strategic approach to facilitate their competitive participation in various stages of project development.
Since the FID announcement, 120 JVs have been evaluated, with 45% receiving PAU’s approval to execute contracts, accumulating a total value of US$260 million.
The sector currently employs 13,067 individuals, 90% of whom are Ugandans, demonstrating a strong commitment to local employment. Additionally, since 2021, 554 small and medium-sized enterprises have benefitted from PAU’s training on identifying and engaging in oil and gas sector business opportunities.
This initiative under a US$ 500,000 Business Linkages Project is undertaken in partnership with the African Development Bank (AfDB) and implemented in the EACOP districts of Mubende, Kyankwanzi, Masaka, Kyotera, Sembabule, Kikuube, Rakai, Hoima, Gomba, and Kakumiro districts.
Challenges
Despite these advancements, challenges such as limited skilled manpower, inadequate financing, extended payment cycles, and geopolitical tensions continue to impact the sector. PAU is actively coordinating with relevant stakeholders to address these challenges, including compliance with legal mandates and enhancing skill levels among local enterprises.
Aheebwa reaffirmed PAU’s unwavering commitment to promoting national participation in Uganda’s oil and gas activities, collaborating closely with stakeholders to ensure sustainable value creation and retention.
While private sector players commend PAU’s dedication to enforcing National Content standards, particularly among international oil companies, concerns remain regarding the timeliness of PAU’s response to procurement process feedback and complaint resolution.
