Friday, August 29th, 2014

COMMUNIQUE ON THE PROCUREMENT FOR THE OIL REFINERY AND THE NEW LAND LAW 12-14 August 2014

communique issued by afiego and partner ngos/cbos from the bunyoro sub region at the end of three stakeholder consultative workshops to discuss the process for the procurement of a company to build the oil refinery and to collect views for a private members bill entitled “the right to fair compensation and transparency in land acquisition, rehabilitation and resettlement law,  held in bugambe, biso and kiziranfumbi- sub counties of hoima and buliisa districts, between 12th  and 14th august  2014

 Preamble

The Africa Institute for Energy Governance (AFIEGO) in partnership with other civil society organizations from the Bunyoro Kingdom including World Voices Uganda, Empagi Zabunyoro, the Bunyoro Youth Forum on Oil, the Green Organization, the Africa Challenge Foundation, the Kyambogo Students Environmental Association, the Kibaale Girl Guides Initiative, the Refinery Residents Association, the Grafen of Butimba and Wambabya, the Kinogozi Womens Association and other community organizations organized 3 seminars at Bugambe, Biso and Kiziranfumbi sub counties to empower the communities on the contractual process for the oil refinery and the process for enacting a new law on compensation  to repeal the current Land Acquisition Act of 1965 in order to protect people’s property rights as provided for under Uganda’s Constitution and ensure transparency in the oil sector. The 3 seminars brought together over 178 participants comprising of local leaders, land owners, community elders, CBO leaders, religious leaders, cultural leaders, primary and secondary school teachers and other stakeholders from the region.

At the seminars, the participants were guided through various oil and other related laws and policies regarding the management of oil, human and property rights. The participants were also trained on the legislative powers of Parliament and District Local Councils and how the participants can influence them to enforce the laws. Procurement of a company to build the oil refinery was also covered.

Specifically, the seminars covered 5 key issues; the land question in Bunyoro, the oil refinery development procurement process and its impacts on human/property rights and revenue transparency, lack of transparency in compensation and procurement, poor enforcement of laws and the delay in passing the Revenue Management Bill 2012 into law. At the end of the seminars, the participants identified several gaps in the entire oil development process and made a number of observations and recommendations for action as follows:

Observations

1.      Outdated laws: The current Land Acquisition Act of 1965 is outdated and does not measure up to Article 26 of the Constitution in as far as the protection of property and human rights are concerned. The situation has been made worse by the failure of the minister for lands to put in place regulations for the assessment and payment of compensation as required by section 20 of the above Act to guide both the central (the Chief Government Valuer) and the District Land Boards (DLBs) to ensure that the rates of compensation they prepare especially for crops and buildings of none permanent nature under section 59 of the Land Act 1998 comply with the dictates of the Constitution. The participants observed that the above failures have contributed greatly to the grabbing of poor people and local communities’ land in the name of development. In cases where the government has tried to compensate the victims, lack of regulations have made it difficult to ensure that such compensation is both prompt and adequate.

2.      Failure to enforce the new oil laws: While we welcome the new upstream and midstream laws of 2013 which have some good provisions to promote good oil governance in Uganda, there are no signs that these laws will be implemented to stop the problems of poor compensation and land grabbing. To make it worse, the government is delaying and or failing to publicize the laws to enable the citizens especially the local communities and the affected people to appreciate how to use the laws to demand for accountability and defend their rights.

3.       Secrecy in bidding processes and evaluation of the bids: We understand that by the end of this year 2014, the government of Uganda will select a company to build and operate a 60,000bd oil refinery. The selection will be made from the two companies namely “South Korea’s SK Energy Company and Russia’s RT-Global Resources”. While we commend such government’s efforts to exploit our oil through value addition, the secrecy surrounding the process is unfortunate and a betrayal to Ugandans who had hoped that the new oil laws would ensure that all oil development processes in Uganda would be open and transparent. Secrecy defeats the principles of good governance of transparency, accountability and public participation that would mobilize the public to ensure that we get the right companies to drive our sector for the common good. We believe that while openness and transparency may not be a sine qua non for responsible use of oil revenues, lack of it provides a huge fertile ground for corruption by both the companies and government. Secrecy is an evil and should be avoided.

4.      Disagreements between the government and the joint ventures regarding the refinery to process oil against the pipeline to export crude: While over 7,000 people of Kabaale-Hoima district have been displaced and 29sqkm of land secured for the refinery, we are concerned that to date, there is no consensus between the government and the Joint Ventures especially Total E & P and Tullow Oil on both the refinery and the pipeline will be management. Instead, the information available indicate that the current oil companies in Uganda are only willing to contribute money to build the pipeline and not the refinery. To make it worse, there is no evidence to show that any of the two final refinery bidders (South Korea’s SK Energy Company and Russia’s RT-Global Resources) from which the government of Uganda will select the company to build and operate the refinery has its own money or capacity to borrow enough money to build the refinery. This means that any of those companies will require government guarantees in order to borrow funds from international financial institutions to build the refinery. If this happens, it will be the beginning of an oil curse in Uganda as there will be no pressure on such private companies to make the refinery economically viable to pay back the loans. Whether the refinery makes profits or not, Uganda’s tax payers like us will have to pay the loans.

5.      Deliberate payment of Billions of shillings to non existing companies: We note with grave concern that our country is now confronted by a situation where those in leadership are conniving with investors against the citizens. It is sad that even before oil revenues begin to trickle in, we are already seeing billions of shillings being paid to non existing companies. These are hard times and we call upon our fellow citizens to stand up and demand for accountability in order to promote the common good.

6.      Weak parliament: The failure by parliament to use her oversight powers to prevail and ensure that the government delivers services to the citizens has continued to render the good laws and development projects irrelevant to the citizens and there is no guarantee that the oil sector will be any different without meaningful reforms. 

7.      Local communities most affected: In all Africa’s oil producing countries, it’s the local communities that have continued to suffer the worst oil impacts due to poor governance in form of weak institutions and autocracy of leaders.

8.      Failure to balance laws, contracts and politics: The existing oil laws including the 2013 upstream and midstream lack clear legal sanctions against bribery, abuse of office and dereliction of duty. The laws also put most of the powers in the executive who continue to use such powers to mix political interests with contracts.

9.      The problem of confidentiality of oil contracts: while we appreciate and observe that historically, contracts have been confidential, the world is now moving at a high speed towards disclosure and such disclosure come with many benefits. Making contracts public ensures the integrity of the bidding and negotiations and allows for parliament and the public to own and ensure contracts are enforced and payments made. It therefore gives such contracts the necessary political legitimacy.

10.  Lack of publication of contracts: We observe that as a general principle, Ugandan laws do allow confidentiality clauses in the contracts. Experience shows that countries such as Nigeria, Egypt and others used to have confidentiality clauses but it became costly and since then, they have decided to publish all of their oil contracts. In Nigeria, the bids received are also published. Any exception to the disclosure requirements must be very strictly and narrowly drawn. On the other hand, in Sao Tome, the law rejects all confidentiality except for “proprietary Industrial property rights/ intellectual property rights.” More so, the Sao Tome’s law requires disclosure by both the government and the investors and disclosure obligation is a contractual requirement in the license and production sharing agreements.

11.  Corruption in public procurement: We observe that this area is the most prone to corruption. At the moment, Uganda lacks laws that can compel all material contracts to be subject to open competitive public procurement. In Sao Tome, any contract is void unless entered pursuant to competitive provisions as required by law.

Recommendations

a). We need a credible company, from a democratic country chosen through an open and competitive process: Considering the social, economic, environmental and political significance of an oil refinery, we call upon the government to ensure that we get a credible investor. This means that the contract to build and operate Uganda’s oil refinery should be given to a right kind of company from a democratic country, even if the financial terms by that company are not the highest. For instance, a company that has a very good environmental record or human rights record or training program or type of technology or local content fitted to Uganda’s oil fields should get the contract. It is therefore necessary that the entire bidding process of selecting the final bidder out of all the six companies which had showed interest in the refinery should be done in the open. The process to select the South Korea’s SK Energy Company or the Russia’s RT-Global Resources as the company to be given the contract should be subjected to effective public hearings from different stakeholders. And the democratic, rule of law and constitutional credentials of home government of the respective companies should also be a key factor to consider in determining the final company to build the refinery.

 b). No government guarantees to private companies to secure loans for the refinery: The government of Uganda should not give any guarantees to any private company contracted to build the refinery. The company should have its own money or capacity to borrow without any government guarantees. This will help our country avoid possibilities of contracting companies that do not have investment capital.

c). Any contract signed with the company should guarantee a large and fair share of profits to the government which increases as oil prices rise.

  d). Under the refinery contract, Uganda as a sovereign state should maintain a satisfactory degree of control over all the operations.

 e). An independent national oil disputes tribunal should be established to deal with all oil related disputes in the country and minimize arbitrations abroad.

f).   The National Oil Company (NOC) and the Oil Authority of Uganda (OAU) should be empowered and supported to effectively safeguard the business interests of the government and ensure strong oil regulation in the country. Now that the officials of the two institutions above have been appointed, they should take responsibility in overseeing the refinery and other oil development processes.

g). All contracts, licenses and MoUs regarding oil development in Uganda should be public documents except only the parts containing intellectual rights.

h) Any officer or government and her agencies suspected of corruption, bribery or any mischief in oil  or any other related developments should immediately step aside until investigations are done and completed.

i). We need a new law on compensation to protect the human and property rights of the poor and vulnerable local communities: The new law entitled “The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement” to repeal the current Land Acquisition Act of 1965 and to act as an enabling law for the enforcement of Article 26 of the Constitution 1995 as amended and other laws on property rights should be urgently enacted to stop or at least reduce the suffering of oil affected communities by guaranteeing the right to prompt and adequate compensation in all cases of land acquisition. In cases of land acquisition, the land to be taken should be the absolute minimum determined through a Social Impact Assessment and the proposed development on the land should take off within not more than one year from the date of acquisition. 

 Conclusion

In conclusion, the participants thanked AFIEGO for organizing the seminars and providing legal guidance to the participants. The participants recommitted to continue working together with AFIEGO to influence policies and ensure that every Ugandan benefits from the oil sector.