Oil Transparency:Does Uganda have anything to hide?

The reluctance by Uganda to sign on to the Extractive Industries Transparency Initiative (EITI) process, threatens to erode any possible gains from the lucrative oil sector, Clare Short, the standard’s International Board chairperson, believes. Short who served as the UK Secretary of State for International Development between 1997 and 2003, was in Uganda last month to among others ascertain the progress the country was making towards complying with EITI principles. EITI is an independent, internationally agreed upon, and voluntary standard that seeks to increase transparency in the oil, gas, and mining industries.

Essentially, it encourages governments to publish information on the payments received from resource extraction companies as well as report the revenues collected from these companies to the public in an accessible and comprehensible manner. The EITI is implemented through a multi stakeholder group, composed of government, extractive companies, and civil society representatives.

In Uganda, the Publish What You Pay Uganda (PWYP-U) chapter has spearheaded the initiative to have EITI implemented in the country. Following the discovery of commercial quantities of oil in the Albertine Graben in 2006, calls for Uganda to become part of the transparency seeking scheme have intensified despite EITI encompassing all extractives’ activities like mining.

Internationally, though, oil grabs more headlines hence the augmented scrutiny of Uganda’s transparency principles in recent times. Investments in Uganda’s oil and gas sector is so far standing at over US$1 billion at and another US $10bn-US$14bn is set to be committed to the same cause as production of the 2.5 billion barrels sets off. In the 2008 Oil and Gas Policy, Uganda committed to implement the EITI but this has not come to pass.

“Uganda is committed to the EITI but there is a delay in implementing it; and that’s a bit worrying. What does that say about the commitment to transparency? I wonder whether there is someone out there who doesn’t want transparency,” said Short, while highlighting how simple the whole joining process was. Simple though is not how the Ministry of Energy spokesperson Yusuf Bukenya Matovu sees it.

To him, there are several steps that have to be taken before actualising EITI in Uganda. “Joining the EITI involves many things like Cabinet and Parliament reviews; but we will get there subsequently. Having said that, it’s not mandatory to join especially seeing that our laws address some of the EITI principles,” Bukenya Matovu said. The Petroleum (Exploration, Development and Production) Bill, 2012 calls for the establishment of the Petroleum Authority of Uganda which among other functions will be charged with ensuring “transparency in relation to the activities of the petroleum sector and the Authority”.

This, according to Bukenya  Matovu should be enough to address all the issues to do with transparency. But like Godber Tumushabe, the Executive Director, Advocates Coalition for Development and Environment (ACODE) notes, it would not be advisable to leave everything to trust as far as the government of Uganda. “Of late, we are increasingly seeing regressive and prohibitive laws enacted in Uganda. When you couple this with a deep mistrust of government by Ugandans and a mistrust of the oil companies and their countries of origin, you understand why signing on to the EITI is very important for us as a country,” notes Tumushabe.

As an international project, he adds, the EITI will ultimately force Uganda to meet internationally accepted levels that it would otherwise have not met. It’s no wonder therefore that in their submission to Parliament about the recently tabled petroleum bills, Civil Society Organisations (CSOs) implore the legislators to ensure “transparency through adopting and implementing the principles of EITI and joining other international bodies and adopting other international principles and standards that reflect best practices that promote transparency and accountability as they emerge.”

According to Short, the advantages to all parties involved in the EITI, are enormous. Repressive governments, for instance, are suddenly regarded as accountable and other member countries get to compare with other states their earnings and can demand a fairer deal if they feel they are being short changed. The often mistrusted international oil companies (IOCs) on the other hand can clearly demonstrate that they actually do make the payments in royalties and taxes as they are required to.

“We are not saying that the EITI will solve all the problems therein but it traps states and IOCs into being more transparent than they could have wished,” she explains.

Suspicion

 “Without information, people get suspicious. For instance we have been denied the findings in the refinery feasibility study and no doubt when it comes to compensating the owners of the land, many problems will arise,” says Robert Byaruhanga, the Bunyoro region field officer for Africa Institute for Energy Governance (AFIEGO), a CSO said. “We need a compensation program first before the land is surveyed. Bad things have happened in Uganda before and we don’t want them repeated here.”

Last year, renowned Microsoft proprietor Bill Gates asked a G20 meeting to compel the Ugandan government to publicize all the agreements and the revenue got from oil; a notion supported by the Publish What You Pay global initiative. Mr Gates argued that while the oil money should be able to cater for the needs of poor Ugandans, they would find it difficult to protect their interests because they had no idea of what is contained in the oil agreements.

The article titled “Government Could Pay Billions for Idle Rigs”, which won New Vision reporter, Ibrahim Kasita top prize at the first oil and gas media awards event organised by the African Centre for Media Excellence and the Revenue Watch Institute last year, for one highlighted the dangers of secrecy in the sector.

Like many observers have noted, such recoverable costs that are not clearly spelled out mainly because the Production Sharing Agreements signed between the state and the oil companies remain secret  may in the long run cause all sorts of anxieties. According to Angelo Izama, a journalist and director of Fanaka Kwawote, a human security think tank, there should be no two ways about transparency in the oil and gas sector seeing that openness or the lack of directly shapes a state’s political future.

“Transparency guarantees our national security today and in the future by reducing suspicion and the erosion of confidence in institutions of state. It diminishes the effects of corruption and wastage therefore guaranteeing a stronger and more civil social compact,” Izama said. “Investing therefore in transparent processes is the most important down payment for stability that the government of the day can make. Similarly open government being safer guarantees the companies the security for their investments.”

Izama, together with then fellow Daily Monitor journalist, Charles Mwanguhya went to court in 2007 seeking to compel the Attorney General to avail information on the oil agreements the Government of Uganda had signed with international oil companies. The Uganda Chamber of Mines and Petroleum Vice President, Mr Richard Kaijuka fully agrees with many of the sentiments raised by Izama. Speaking at a recent Uganda Revenue Authority public summit to highlight the opportunities in the oil sector, Kaijuka noted that transparency would be important in managing Ugandans’ expectations from the sector.

“I don’t blame society when it insists on disclosure. What is magical about being open? If I was still Minister of Energy, I would insist that we lay the PSAs on the table so that people are at ease. Uganda has after all done remarkably well as far as the sharing proportion is concerned. But this continued secrecy means everyone will be worried. Be open and transparent and the general public will be at peace,” he said.

Fortunately, there seems to be more openness from the state as demonstrated in a two day meeting at Munyonyo late last month where the Ministry of Energy with support from the Norwegian government, sought to enhance MPs’ appreciation of the oil sector and equip them for the forthcoming debate about the oil bills.