Targeting inclusive growth in the oil industry

Uganda's Third National Development Plan (NDP III) 2020/21 - 2024/25 recognises developments in the country's oil and gas sector as one of the growth drivers for the economy.



Experience from oil producing countries across the world shows that, for the extractives sector to spur inclusive growth, deliberate efforts have to be made to ensure that the benefits from the sector reach the wider population.

The benefits from Uganda's oil and gas sector are spreading to the wider population in two major ways.  

First, the revenues generated from oil and gas activities to date, together with the revenues expected to be generated from the sale of crude oil, are to be utilised to build the country's durable capacity. This includes infrastructure and aspects of social development like health and education, together with enhancing the competitiveness of the non-oil sectors in areas like mechanisation of agriculture.  

The use of these revenues to address these strategic areas of development will contribute to the country's ongoing transformation and inclusive growth.

Secondly, and very important, putting in place of the infrastructure required to produce and commercialise the country's oil and gas resources, is expected to bring into the country investments between $15 to $20b in the next three to five years.  

These investments, which are being made before commencement of oil production, present a significant opportunity for the oil and gas sector to contribute to inclusive growth. These investments are to be made in the development of the following infrastructure: 

INFRASTRUCTURE TO PRODUCE OIL

This includes drilling and completing more than 400 wells, setting up two central processing facilities, laying over 200km of infield flow lines, laying over 150km of feeder pipelines, together with construction of base camps and minor access roads, among others.

These facilities are required for the two field development projects of Tilenga and Kingfisher which are collectively estimated to cost $8b.

CONSTRUCTION OF THE EAST AFRICA CRUDE OIL PIPELINE (EACOP)

• The 1,445km heated pipeline from Hoima in Uganda to the port of Tanga in Tanzania is estimated to cost $3.5b.
  
  Development of a 60,000 barrels per day Greenfield refinery in Uganda estimated to cost over $3b.

• Construction of infrastructure like the second international airport for the country and upgrading the existing transport networks including major roads and bridges, which will cost over $1 b.

• Other investments in the sector include the acquisition and processing of seismic data together with drilling of wells in the areas which are newly licensed for petroleum exploration, and the development of a petroleum based industrial park in Kabaale, Hoima district.

The development of this infrastructure provides immense opportunities for inclusive growth through the participation of Ugandans and Ugandan enterprises by providing goods and services to the sector, which is also referred to as national content. The objective of national content is to achieve in-country value creation and retention, while ensuring competitiveness, efficiency and effectiveness of these projects.

Implementation of national content in the sector will not only provide revenues to the country and income to the population, it will also provide significant opportunities for the development of the country's human capital through skills and enterprise development. 

NATIONAL CONTENT KEY FOCUS

The key areas of focus in progressing national content include: employment of Ugandans, skills development and capacity building and enterprise development. It also includes the use of locally produced goods and services together with transfer of knowledge and technology. 

The Government is working with the private sector and development partners to achieve national content and inclusive growth through the following strategies.



1. JOB CREATION AND VOCATIONAL SKILLS DEVELOPMENT

Studies carried out by the Government and the oil companies established that the infrastructure developments mentioned above will create over 160,000 direct, indirect and induced jobs.

As indicated in the table, over 70% of these jobs will be for artisans and technicians. The skill standards required by the oil industry are high and require international accreditation. This has, therefore, created opportunities for certified skills training in the country by different institutions.

These include Government aided Vocational Training Institutes (VTIs) both in the Albertine Region, such as Uganda Petroleum Institute, Kigumba, St. Simon Peter VTI, Buhimba Technical Institute.

There are also others located in the other parts of the country. In addition, private training companies like Q-Sourcing and SunMaker, among others, have established training facilities in the country to meet this emerging oil and gas skills demand.  

These institutions have begun providing international certification like City and Guilds of the United Kingdom, American Welding Society Certification (AWS) and Engineering Construction Industry Training Board (ECITB) among others.

Over 2,000 Ugandans have been trained  in different technical skills that meet international standards, and these will be able to benefit from the jobs that are being created in the sector. This certified skills development is continuing at the different institutions in the country, with a view to achieve the very large numbers required by the sector during the next 3-5 years.

The skills acquired through these skills development programmes are not restricted to the oil and gas sector but are also transferable to other sectors of Uganda's economy and are in high demand internationally.



2. CAPACITY BUILDING AND PROMOTION OF UGANDAN ENTERPRISES

Uganda's oil and gas legislation gives priority to the provision of goods and services by Ugandans and Ugandan enterprises where practical and cost effective. The legislation further provides for 15 categories of goods and services reserved for Ugandan entrepreneurs.  This has enhanced the opportunities for Ugandan enterprises to participate in the new and growing oil and gas activities in the country.  

The Government, together with the oil companies, is undertaking a number of initiatives to ensure that Ugandans are prepared for the opportunities in goods and services provision. These initiatives include: i) Holding supplier development workshops to share information on upcoming tenders and projected demand for required goods and services to the market in good time. ii) Establishing an Industry Enhancement Centre to raise awareness and the standards of businesses and entrepreneurs, as well as equipping them with improved business planning and management skills, and, iii) Implementing of an agriculture development programme to support farmers to meet the petroleum sub-sector standards and requirements, while also meeting local demand.  

In addition, organisations like Stanbic Bank Uganda, GiZ, TraidLinks and Living Earth Uganda, among others, have intervened with business/ enterprise development programmes aimed at preparing and strengthening SMEs to deliver goods and service contracts in the oil and gas supply chain.

In this regard, Stanbic Bank is implementing a business incubator facility, where close to 700 Ugandan entrepreneurs have and continue to be equipped with business skills to enable them meet the high standard requirements of bidding for, and executing work for the oil and gas industry.

The capacity of community enterprises and business associations in the Albertine Graben like Hoima District Farmers Association (HODFA), youth and women groups in Buliisa together with individual farmers and other entrepreneurs has and continues to be enhanced to supply the oil companies together with their contractors and sub-contractors.

These national and community content initiatives are indeed beginning to bear results. Out of the $3.4b invested by the licensed oil companies to date, 28% went to Ugandan entities through provision of services like legal and other professional support, freight forwarding and customs clearance, waste management, provision of assorted personal protective equipment, catering services, land surveying and management services, among others.

INCLUSIVE GROWTH

The oil and gas sector is contributing to inclusive growth in the country and there is significant potential for this contribution to be further enhanced. This is being achieved through the implementation of policies which enable the revenues generated from the petroleum resources to reach the wider population and ensuring that optimum national and community participation in the delivery of goods and services to the sector is achieved.

Uganda has put in place the required policies and legislation for the oil and gas sector and is working to increase the participation of its citizens and enterprises. The development of National Content is a process and not an event and is therefore growing with time.  This growth is expected to progress from the current 25-30% to the planned target of 80% in 2040. Achievement of this goal will require the organised and dedicated participation of all stakeholders.

BENEFITS FOR LOCAL COMMUNITIES

Even before commercial production is undertaken, the oil and gas sector is already providing important opportunities for the country and the communities.  It is expected that these benefits and opportunities will continue and even expand as the sector progresses. These benefits include;

-Infrastructure developments such as road networks in previously remote areas in the Albertine Graben and along the pipeline corridor. Over 600km of roads and two bridges are under construction.

-Skills development for the sector. Over 2,000 Ugandans have been trained in various technical disciplines in the oil and gas sector such as construction, welding, scaffolding, Health Safety and Environment (HSE). These skills are transferable and can be ably applied to other infrastructure development projects in and out of the country.

-The Authority has also developed a national suppliers database for persons with varying skillsets and interested in working in the oil and gas sector. It is a platform that conveniently gives visibility to employers looking for skilled people to employ. This can be utilised to create efficiency in the recruitment process.

-An agriculture development programme for the Albertine Graben is being implemented to build the capacity of farmers and their enterprises to meet the expected demand for quality agricultural products. This programme is intended to address the challenges and make visible the opportunities. This will lead to the development of the Albertine Region as a model of value-added commercial agriculture and serve as a stimulus for market-oriented agriculture development in the region and the country at large.

-Physical and land use planning to ensure planned and organised development in these areas.

-Corporate Social Responsibility Initiatives undertaken by the oil companies in the areas in which they operate.  Through the CSR programmes, companies have provided local communities with some infrastructure such as schools, health centres and enterprise projects. The projects are discussed and agreed with the local leadership to ensure they are in line with the district development plans before implementation.  

-Improved access to information on oil and gas activities: Government and Oil companies continue to educate, inform and update stakeholders through various fora such as radio talk shows, workshops, the media and community sensitisation meetings.