AG pins ministry on flaws in petroleum data management

The Office of the Auditor General has warned the Ministry of Energy and Mineral Development (MEMD) against flaws in management of petroleum data.

The Auditor General has unearthed shortcomings in the management of petroleum data by the ministry, which, he said, may affect the completeness of the data on the existing petroleum potential, extent of reserves, and amount recoverable thus reducing Uganda's ability to maximally exploit and benefit from its oil and gas resource potential.

The revelations are contained in the Value for Money (VFM) Audit Report of the Auditor General for the Year Ended December 2016, where the AG made reports one of which was on "Management of petroleum data by the Petroleum Exploration Development and Production Department under the Ministry of Energy and Mineral Development."

Petroleum data refers to all the data relied upon by government, oil companies or other actors to determine the existing petroleum potential, extent of reserves, and amount recoverable. It comprises geological data, gravity and magnetic data, seismic data and well data.

A VFM audit is an independent and objective examination of whether government undertakings, systems, operations, programmes, activities or operations are operating in accordance with the principles of economy, efficiency and effectiveness and whether there is room for improvement.

The Office of the Auditor General has, to date, submitted 88 Value for Money audit reports to Parliament. Of the reports so far submitted, eight (8) are in respect of the audit year ending 31st December 2016.

The AG explained that since the 1980s, government and private companies have been collecting petroleum data. Government collected preliminary geological and geophysical data to identify petroleum potential and market demarcated blocks and following this, private oil companies came to conduct further reconnaissance studies, and later for oil exploration.

In 2006, he said, the discovery of oil in commercial quantities in Uganda triggered more activities in the upstream oil and gas industry.

"Policies and regulations have been enacted, and exploration licenses so far issued to three International Oil Companies (IOCs); Total E&P, China National Offshore Oil Corporation (CNOOC) and Tullow. The oil companies have been involved in exploration and development activities in the Albertine Graben."

He noted that as a result of the exploration and development activities in the Albertine Graben, the Minister of Energy and Mineral Development (MEMD) granted eight Petroleum Production Licenses for oil fields in Exploration Area 2 (EA2) and Exploration Area 1 (EAI) to Tullow, Total and CNOOC as joint venture partners on August 30, 2016 marking the start of the production phase.

According to AG's findings, the oil companies did not fully comply with submission of reports relating to their drilling, exploration activities and operations as required.

"Delays and non- submission of reports results in an incomplete database which may reduce the effective use of the database in petroleum resource management," he said

He further revealed that the statements of recoverable expenditure for Exploration Area-2 for the period 2014 and 2015 indicated that there were unapproved budget overruns of US $1m arising from various activities related to data acquisition.

He warned that failure to manage costs results into probability of non -recoverability of costs by the International Oil Companies which may lead to arbitration adding that in case of recoverability, this will result into higher costs of data acquisition than was expected.

He faulted the Petroleum Exploration Development and Production Department on inadequate quality control and assurance undertaken on well data and reports submitted by IOCs.

The AG note that out of 19 files reviewed, 13 did not show evidence of quality control checks and that also out of the sampled10 seismic surveys conducted, staff took part in the verification/ quality control process of four seismic surveys.

"Consequently, failure to subject the data and reports to a quality control and quality assurance processes compromises the quality of the data," he said

On data storage and safety, the findings show that a review of the current database of users and their responsibilities revealed a number of generic accounts, but that there was no formal list of users who are allowed to use these accounts and in addition, such user accounts were being used to delete, edit and create data in the production database.

The AG revealed that the Petroleum Exploration, Development and Production Department did not have guidelines and procedures for data dissemination.

Among the key recommendations was that requiring the Ministry of Energy and Mineral Development  through the Petroleum Authority of Uganda (PAU) to formulate guidelines for submission of well data, geological and geophysical data and reports (upstream activities); and put in place adequate mechanisms to monitor compliance with this requirement by IOCs.

The AG also wants the ministry to, through PAU formulate guidelines for purposes of streamlining the data verification and quality check process for well data.

Further still, the AG recommended that the  Ministry, through the department should formulate an IT information security policy and develop procedures for managing information security, including specifying the management of generic user accounts and segregation of duties.

The AG recommended that the Ministry should formulate a data management policy and strategy, and a disaster recovery plan and that through PAU it should also ensure that the data management system including the Crane database is fully updated to ensure effective dissemination of data to authorized users/potential investors.

"The National resource databank should be set up for effective management of petroleum data," the AG said adding that the Ministry through PAU should develop guidelines for data dissemination including procedures on determining rates for the sale of data. -ends-