Page 5 - AfrOil Week 18 2020

AfrOil COMMENTARY AfrOil
 According to the site, the Auditor General of Uganda (AOG) has issued a new report to fol- low up on its 2015 audit of the government’s local-content strategy. In the report, it noted that the audit had led to some positive results, especially with respect to the decision to make the Petroleum Authority of Uganda (PAU), rather than the Ministry for Energy and Mineral Development (MEMD), responsible for co-or- dinating and enforcing local content standards.
Since 2015, AOG said, PAU has succeeded in securing the parliament’s approval for a body of local content regulations and the cabinet’s endorsement of a local content strategy that includes concrete metrics for performance. It has established the National Supplier Database (NSD) and developed the National Oil and Gas Talent Register (NOGTR) so that IOCs can identify local service providers and personnel more easily. Additionally, it has helped local companies secure the international certi ca- tions that will allow them to secure more con- tracts from oil and gas operators.
Meanwhile, it has also carried out sector-spe- ci c analyses in an attempt to pinpoint oppor- tunities for local companies. In the agricultural realm, this has led to the creation of the Agri- cultural Development Programme, which is designed to help Ugandan food suppliers meet the needs (and ful l the requirements) of IOCs working in the country.
The AOG report also cautioned, though, that PAU still had work to do. It called upon the agency to ensure that local content regulations included provisions for de ning and enforc- ing “added value,” especially with respect to compliance by IOCs. More speci cally, it rec- ommended that PAU work closely with China National Offshore Oil Corp. (CNOOC) to ensure that the company upheld its obligations with respect to local content targets.
Implications
Both of these countries are focusing on local content because they are keen to turn oil pro- jects into a springboard for economic growth. But they are taking slightly di erent approaches to the matter, largely because they are not at the same stage with respect to the development of their oil reserves.
at is, Equatorial Guinea is already produc- ing oil in commercial quantities and has been doing so for nearly 25 years. (Indeed, some of its initial discoveries have already passed their peak.) It has already convinced IOCs to make long-term commitments to developing the country’s resources – and in the process, to working with local contractors and partners. It is also working with IOCs on a wider range of projects.
As such, it is not surprising that Equato- rial Guinea’s local content plans fall within the framework of a wider e ort to assuage inves- tors’ concerns. MMH’s press release does not just talk about local content. Instead, it leads with the announcement that the ministry has granted oil and gas operators a two-year
extension for all exploration programmes and then stresses Malabo’s willingness to be exible with upstream producers’ work programmes. It also links these initiatives to the government’s Year of Investment plan, which aims to expand and improve the country’s midstream and downstream capacity.
AOG’s observations, meanwhile, re ect the fact that Uganda is not yet engaged in commer- cial oil production. Indeed, the agency mentions this matter directly, noting that IOCs have yet to start li ing barrels from their elds near Lake Albert or constructing the East African Crude Oil Pipeline (EACOP) to establish an export route for future output.
It also points out that the postponement of rst oil has important implications for the Ugandan economy. Since oil extraction and pipeline construction are the most labour- and cost-intensive stages of development projects, it explains, they tend to be the largest sources of new jobs – and not just for Ugandans directly engaged in hydrocarbon production, but also for Ugandans working in related industries such as transportation and food services. As a result, PAU – and by extension, the rest of the country – is still waiting to see how local-content promo- tion plays out.
Expectations
Because of these di erences, Equatorial Guinea can take action more quickly.
Indeed, it has already done so. MMH has, as noted above, issued a ministerial order extend- ing the term of exploration programmes by two years. at is, it has given IOCs and local com- panies time to absorb the impact of low prices, falling demand and other consequences of the pandemic, and it has done so without imposing onerous bureaucratic obstacles.
At the same time, it has also taken some steps to secure the funding it needs to keep the oil sector a oat from other sources. According to a statement from the African Energy Chamber, MMH o cials met with representatives of the Development Bank of the Central African States (BDEAC) on April 29 to discuss options for the “mobilisation of African capital” to support the industry.
Uganda, by contrast, is moving more slowly. According to statements made by Minister of Energy and Mineral Development Goretti Kitutu in mid-March, the East African coun- try has not completed the process of setting up the Local Content Development Fund (LCDF), which will help Ugandan businesses secure con- tracts from oil companies by providing them with credit on easy terms.
Kitutu did say that she expected the agency to begin functioning in the near future. But she also noted that Kampala was still working to capitalise the Uganda Development Bank (UDB), which will serve as another source of credit for domestic contractors.
She also asked for patience, saying: “We should not give up hope in the oil and gas sec- tor.” ™
“ Guinea has given
IOCs and local companies time to absorb the impact of low oil prices and falling demand
Equatorial
Week 18 06•May•2020 w w w . N E W S B A S E . c o m
P5