Government to use oil revenue to fight poverty
Aug 22, 2009
THIS is the edited speech made by the Minister of State for Mineral Development, Peter Lokeris, recently during an advocacy clinic on promotion of transparency, accountability and ecological sustainability in the oil and gas sector. Excerpts.
By Peter Lokeris
THIS is the edited speech made by the Minister of State for Mineral Development, Peter Lokeris, recently during an advocacy clinic on promotion of transparency, accountability and ecological sustainability in the oil and gas sector. Excerpts.
Government’s systematic efforts to promote the exploration of oil and gas for the last 23 years have paid off with the discovery of commercial oil and gas resources in 2006. Since then, remarkable progress has been made to increase exploitable reserves.
For example, 34 exploration and appraisal wells have been drilled on the different prospects identified by the seismic data. Out of these, 32 have encountered petroleum in the subsurface. It is estimated that the volume of petroleum in the country to date is over two billion barrels of oil equivalent. These resources can support commercial oil production.
Challenges
While the discovery has brought significant opportunities for the country, it has also created key challenges which we need to deal with.
For instance, there has been a lot of excitement and expectations. People expect quick revenue, jobs and businesses. There are those who are skeptical about how the oil revenues will be spent, those who are concerned about environment degradation and those who genuinely want to be informed about the sector. Others are searching for their own benefits, instilling fear among the public while advocating for funds from donors on the pretext that they have a huge problem to solve.
To address these challenges, the Government, through a consultative process, has formulated the National Oil and Gas Policy for Uganda, which was put in place in February 2008. It articulates Government’s goals and objectives in the utilisation of oil and gas resources and the key actions to take to address the challenges.
The main aim of the policy is to “use the country’s oil and gas resources to contribute to early achievement of poverty eradication and create lasting value to societyâ€. Below are some of the objectives of the policy:
To ensure efficiency in licensing areas with the potential for oil and gas production.
To establish and efficiently manage the country’s oil and gas resource potential.
To efficiently produce the country’s oil and gas resources.
To promote valuable utilisation of the resources.
To promote the development of suitable transport and storage solutions which give good value to the country’s oil and gas resources.
To ensure collection of revenues and use them to create lasting value for the nation.
To ensure optimum national participation in oil and gas activities.
To support the development and maintenance of national skills and expertise.
To ensure that oil and gas activities are undertaken in a manner that conserves the environment and biodiversity.
To ensure mutually beneficial relationships between all stakeholders.
To operationalise this policy, goals and objectives, the Government is undertaking the following key actions:
A new petroleum legal framework which will include the emplacement of a resource management law. The revenue management law is being drafted.
An efficient resource management system is also being put in place through the creation of a sound institutional framework which separates policy setting and business promotion from regulation of the industry and commercial businesses. This will lead to the creation of a directorate of petroleum in the responsible ministry, a Petroleum Authority of Uganda; and a National Oil Company.
Ensuring optimum national participation in oil and gas activities. All Ugandans and enterprises will participate in the provision of goods and services to the industry.
Development of a communication strategy to bridge the communication gap between the oil and gas industry and the public.
Formulation of a petroleum fund which will house revenues from the sector, before using them to create durable wealth.
Development of specialised skills required in the industry through the establishment of training institutions. The Uganda Petroleum Institute at Kigumba is a good case in point.
Environmental mitigation
As required by the National Environment Act, before undertaking oil exploration activities, companies carry out environmental impact assessment (EIA). Upon completion of the assessment, a report is submitted to National Environment Management Authority for approval. Todate, the EIA process has been undertaken for all activities involving petroleum exploration.
The responsible government institutions monitor the company’s compliance with the EIA report.
Community participation
The companies exploring oil undertake corporate social responsibility in their areas of operation. Through this programme, they have provided local communities with infrastructure such as schools, health centres and roads.
The companies are also required to provide employment opportunities to the local people in the areas of operation and this has been done. Over 300 people are employed during the seismic surveys, while about 100 are employed in the drilling operations. The number is expected to grow as more Ugandans acquire oil exploration skills.
There are no revenues being generated from the oil discovered so far until commercial production starts. During the exploration phase, companies spend risk capital which is only recoverable if a discovery is made and production starts. If no discovery is made, then the company leaves.
However, upon commencement of production, part of the revenues will cover the costs incurred by the company during the exploration stages. The Government and the company will then share revenues which are not used to cover the costs.
Opportunities for the country
As indicated above, over 10 additional oil discoveries have been made in the Albertine Graben since 2006. The country’s resource base has also increased from 300 million barrels of oil in 2006, to about two billion barrels todate.
The discoveries made so far can support the production of over 100,000 barrels of oil per day for 20 years and are, therefore, sufficient to implement large-scale refining in the country.
The writer is the Minister of State
for Mineral Development
THIS is the edited speech made by the Minister of State for Mineral Development, Peter Lokeris, recently during an advocacy clinic on promotion of transparency, accountability and ecological sustainability in the oil and gas sector. Excerpts.
Government’s systematic efforts to promote the exploration of oil and gas for the last 23 years have paid off with the discovery of commercial oil and gas resources in 2006. Since then, remarkable progress has been made to increase exploitable reserves.
For example, 34 exploration and appraisal wells have been drilled on the different prospects identified by the seismic data. Out of these, 32 have encountered petroleum in the subsurface. It is estimated that the volume of petroleum in the country to date is over two billion barrels of oil equivalent. These resources can support commercial oil production.
Challenges
While the discovery has brought significant opportunities for the country, it has also created key challenges which we need to deal with.
For instance, there has been a lot of excitement and expectations. People expect quick revenue, jobs and businesses. There are those who are skeptical about how the oil revenues will be spent, those who are concerned about environment degradation and those who genuinely want to be informed about the sector. Others are searching for their own benefits, instilling fear among the public while advocating for funds from donors on the pretext that they have a huge problem to solve.
To address these challenges, the Government, through a consultative process, has formulated the National Oil and Gas Policy for Uganda, which was put in place in February 2008. It articulates Government’s goals and objectives in the utilisation of oil and gas resources and the key actions to take to address the challenges.
The main aim of the policy is to “use the country’s oil and gas resources to contribute to early achievement of poverty eradication and create lasting value to societyâ€. Below are some of the objectives of the policy:
To operationalise this policy, goals and objectives, the Government is undertaking the following key actions:
A new petroleum legal framework which will include the emplacement of a resource management law. The revenue management law is being drafted.
An efficient resource management system is also being put in place through the creation of a sound institutional framework which separates policy setting and business promotion from regulation of the industry and commercial businesses. This will lead to the creation of a directorate of petroleum in the responsible ministry, a Petroleum Authority of Uganda; and a National Oil Company.
Ensuring optimum national participation in oil and gas activities. All Ugandans and enterprises will participate in the provision of goods and services to the industry.
Development of a communication strategy to bridge the communication gap between the oil and gas industry and the public.
Formulation of a petroleum fund which will house revenues from the sector, before using them to create durable wealth.
Development of specialised skills required in the industry through the establishment of training institutions. The Uganda Petroleum Institute at Kigumba is a good case in point.
Environmental mitigation
As required by the National Environment Act, before undertaking oil exploration activities, companies carry out environmental impact assessment (EIA). Upon completion of the assessment, a report is submitted to National Environment Management Authority for approval. Todate, the EIA process has been undertaken for all activities involving petroleum exploration.
The responsible government institutions monitor the company’s compliance with the EIA report.
Community participation
The companies exploring oil undertake corporate social responsibility in their areas of operation. Through this programme, they have provided local communities with infrastructure such as schools, health centres and roads.
The companies are also required to provide employment opportunities to the local people in the areas of operation and this has been done. Over 300 people are employed during the seismic surveys, while about 100 are employed in the drilling operations. The number is expected to grow as more Ugandans acquire oil exploration skills.
There are no revenues being generated from the oil discovered so far until commercial production starts. During the exploration phase, companies spend risk capital which is only recoverable if a discovery is made and production starts. If no discovery is made, then the company leaves.
However, upon commencement of production, part of the revenues will cover the costs incurred by the company during the exploration stages. The Government and the company will then share revenues which are not used to cover the costs.
Opportunities for the country
As indicated above, over 10 additional oil discoveries have been made in the Albertine Graben since 2006. The country’s resource base has also increased from 300 million barrels of oil in 2006, to about two billion barrels todate.
The discoveries made so far can support the production of over 100,000 barrels of oil per day for 20 years and are, therefore, sufficient to implement large-scale refining in the country.
The writer is the Minister of State
for Mineral Development