Public Finance Bill: How government seeks to manage oil cash [Daily Monitor, The (Uganda)]
(Daily Monitor, The (Uganda) Via Acquire Media NewsEdge) KAMPALA-On January 31, 2012, Ms Sarah Mitanda, on behalf of First Parliamentary Counsel, wrote a letter to the Cabinet in relation to the Certificate of Compliance by the First Parliamentary Counsel in respect of the drafting of the Public Finance Bill, 2012.
When it was tabled in the House later that year, it came as a combination of three: the Budget Bill, the Public Finance Bill and it would cater for the Petroleum revenues. However, the MPs on the House Committee on Finance, civil society members, a cross section of MPs and even the Speaker of Parliament expressed discontent about the Bill.
The controversiesThe contentions: That the Speaker reasoned the Bill's proposal to remove the Parliament Budget office will clip Parliament's power in the budget process. Some MPs and CSOs opposed it saying it has clauses that could facilitate the pilfering of public funds by ruling NRM party members. In short, there was a wide call for the Ministry of Finance to revise the Bill. Speaker Kadaga wanted it to be split into three Bills; the Budget Bill, the Public Finance Bill and a separate bill for oil revenue management.
The debate on the Bill is back and last week, Mr Lawrence Kizza, a Ministry Of Finance commissioner, tabled a document with 55 changes to the original Bill, including changing the title of the Bill from Public Finance Bill to Public Finance Management Bill, before a joint committee comprising members from Finance, Budget and Natural resources committees of Parliament.
"We have listened to a lot voices on the content, structure and omission in the Bill and agreed with a lot of their proposals," Ms Maria Kiwanuka, the minister of Finance, wrote in a letter to the chairperson of Finance committee. "We are requesting that these proposals by the stakeholders be considered during discussion considerations of the bill in your committee…"
However, Mr Jacobs Oboth Oboth (Indep West Budama South) said during last week's committee meeting that it is a sign that the ministry does not believe in the Bill it first presented and they are attempting to rewrite it through committee level.
A document prepared by technocrats in the Parliament budget office titled; "General comments/observations" on the new Bill in relation to the Budget Act 2001 and the Public Finance and Accountability Act 2002, argues that the Bill is unconstitutional and calls on Parliament to reject it.The document notes that it is wrong for the government to attempt to repeal the budget act which came as a result of a private members' bill.
Unconstitutionality"It looks ironical for the government to repeal other than amend a law that for the last decade made the Parliament of Uganda admirable in the way it has handled the budget process," it reads in part. "It is incumbent upon government to provide a justification for the repealing of the Budget act 2001."
The document further notes that while the Constitution provides for the President to be involved in preparing budget estimates, the new Bill gives the powers to the minister of Finance. "We consider this unconstitutional and the law should be harmonised with the constitutional provision," the technocrats observe in the document leaked to this newspaper. "What were the framers of the Bill have in mind by ignoring this very important constitutional provision and what were their intentions?"
Mr Kizza told the committee that the government chose to repeal the act and instead bring an omnibus Bill to stream the management of public finances- especially in consideration with the expected petrodollars.
To provide for independence in the internal audit function, the Bill proposes a creation of an internal auditor general who shall be designated by the Public Service and responsible to the Secretary to the treasury for developing and the implementation of the internal audit strategy and to also undertake special and investigative audits- at the request of the Secretary to the Treasury.
The Bill also introduces a new clause 17: publication of pre and post-election economic and fiscal reportsAccording to the Bill, the minister of Finance shall publish a pre-election economic and fiscal update not earlier than four months before the polling day for any general elections and a post economic and fiscal update not later than four months after the polling day of any general election.
The update shall detail all election-related spending, including direct election expenses such as those for the Electoral Commission for costs of elections and materials, and all indirect expenses such as allocations to the police and security forces for the election year.
The Bill provides that the collections and deposit of petroleum revenues due to the government, including penalties for late payments, shall be put in a petroleum fund and administered and over seen by the URA. The earlier Bill had provided that the fund would consist of the petroleum holding account into which all revenues accruing to the government would be put, and a petroleum revenue investment reserve where money from the petroleum revenue holding account, for finance investments for the benefit of the current and future generations would be put. However, the government moved from that position and chose to only create one fund for the oil money.
Bill defendedJustification: It is not advisable, Finance Minister Maria Kiwanuka says in the amendments presented to the committee, to split the petroleum fund into petroleum holding account and a petroleum investment reserve. "The split effectively prohibits the government from ever accessing the principal of the petroleum investment reserve for budget financing. This is likely to prove incredible in a country with relatively limited oil reserves and large long term development needs.
"Furthermore, if, in a given year, oil production is temporarily interrupted, the government will be forced to resort to expensive borrowing, rather than redeeming some of its petroleum fund investments, to meet its expenditure needs," she says.
That notwithstanding, withdrawals from the fund, the bill says, shall be made under authority granted by an appropriations act and a warrant of the Auditor General.
The Bill also creates an investment advisory Committee to advise the minister on the investments to be made with the petroleum Revenue Investment funds. The chairperson of the investment advisory committee, the Bill says, shall not be a public servant and shall be appointed by the minister with approval of Parliament.
The Bill provides that the government shall retain 93 per cent of the revenues from royalties arising from petroleum production and the remaining seven per cent shall be shared among the districts located within the exploration and production areas.
The revenues from royalties due to the districts shall be shared among the districts involved in the petroleum production based on the level of production of each district.
The Bill further provides that the revenue from royalties shall be appropriated to a district in form of a grant in the annual budget and shall be considered as part of the revenue of the district and shall be integrated in the budget of the district to be spent on priorities determined by the district council in accordance with the national priority programs.
However, the revenue to a district in a financial year shall not exceed the total of the non-oil revenue of that district and in case it is in excess, the excess money shall be held by the minister of finance in trust for the district and the money shall be used to stabilise the fluctuation in the non-oil revenues for the concerned district.
Meet Ernest Rubondo, Uganda's oil "sheikh"
I choose to call him the oil sheik because he is the man behind the oil and gas sector in Uganda, at least all the technical and marketing aspects.
Ernest Nathan Tumwine Rubondo was born on October 14, 1958.He was one of the people that President Museveni sent abroad to study oil and gas before settling him at the Petroleum Exploration and Production Department where he now works as the commissioner. He finished primary school in 1971 at Lake Victoria Primary School, Entebbe, before joining Kings College Budo for his O' and A' level from 1972 to 1977.
Mr Rubondo, as he is known in the oil and gas circles, got his first degree at the ChangChun College of Geology in China before doing a Post graduate Diploma in Petroleum Exploration and Engineering at the University of Trodheim in Norway from 1987 to 88.
Thereafter, he went for a Master of Science, in Petroleum reservoir geology at the Imperial College of Science, Technology and medicine at the University of London from 1989 to 1990 and lastly a Postgraduate diploma in management of Petroleum Operations at the International Program for Petroleum administration in Norway in 1994. He has had a plethora of professional training in oil and gas, including International Petroleum Exploration and Development Business Management Programme conducted by IHRDC, in Boston Massachusetts USA in 1998 and a Diploma in International Petroleum Business organised by the Petroleum Management Institute, Austin in 2007. Mr Rubondo, who also speaks Chinese, is married with four children.
On taking up the job at PEPD, Mr Rubondo became the face and oil and gas locally and internationally where he travelled to sale Uganda's oil potential.
Over the years, he has got involved in a series of professional activities including a study of granite distribution in over 5,000 square kilometers of South Western Uganda with a view of establishing their relationship to tin, tantalite, wolfram and other mineralisation in the region, 1984.
And the evaluation of the Petroleum (Oil and Gas) potential of the different sedimentary basins in the Albertine Graben in Uganda, and promotion of these basins to oil companies for investment.
He was also part of the implementation of the procurement component of World Bank project No.UG.1561, for petroleum exploration promotion in Uganda.
Bunyoro leaders want Bill revised
Leaders in the oil-rich Bunyoro region have petitioned Parliament to review the public finance bill, 2012, one of the proposed oil legislations to include interests of communities where oil has been discovered.
During a one-day dialogue that was recently organised by Kitara Heritage Development Agency, an oil advocacy NGO, religious, political, civil society and cultural leaders demanded for a revision of the bill to increase on the economic benefits the region will obtain from oil.
"The proposed 7 per cent share of the royalties to the oil producing districts is not fair and should be revised to cater for the unique demands of the region. Municipalities and urban councils should be provided for in the sharing of royalties," the leaders stated in an October 11 resolution, which they intend to present to the Speaker of Parliament.
The leaders argued that since land is also the most emotive, culturally sensitive and economically central issue in Uganda, there is also a need to take care of the interests of individual land owners whom the Bill has omitted.
The Bunyoro Affairs minister, Mr Ernest Kiiza, assured participants that the government had put in place a legal and regulatory framework that will ensure oil yields maximum returns for the country."Government is conscious of a need for involvement of the local communities in the management of oil. I urge leaders to stop lamenting and instead prepare people to tap the benefits of the oil industry," he said. He advised them to make realistic proposals on oil revenue sharing which will not alarm the country as a whole since oil is a national resource that will benefit the whole country.
"Oil producing districts should be deleted from the public finance bill to avoid inclusion of non oil producing districts" the participants said during a dialogue that was held Hoima Town on Friday.
Bunyoro Kingdom deputy prime minister Blasio Mugasa reiterated kingdom's demand to have it included in the oil revenue sharing formula given that the institution has a cultural mandate to perform and the king culturally owns large chunks of land, including land where oil is being explored. [Francis Mugerwa, Monitor]
Tullow halts Kenya operations
Tullow Oil plc has temporarily suspended all operations in Blocks 10BB and 13T.According to communication from the Tullow, the suspension is a precautionary measure following demonstrations by local people regarding employment complaints.
One of the affected blocks, 13T, is where Ekales-1 wildcat- drilling for oil or natural gas in an unproven area- discovery is found.
The communiqué from the oil company notes that the decision to suspend exploration and appraisal operations was taken to prevent further escalation of the demonstrations while discussions to resolve this issue for the long term are ongoing. "Tullow is working closely with the local communities, the local Government and the national Government so that the company can resume work on Blocks 10BB and 13T as soon as possible," the email sent out by Tullow reads in part.
It adds: "Tullow takes its relationships with the local communities extremely seriously and the Company is fully committed to utilizing as many local workers and local services as possible."
Uganda's oil discovery through the years
1900. The British East African Syndicate is given green light by the colonial administration to commence oil explorations in south-west Uganda.1913. A British team led by A.W Cook start exploration at the Kibiro Oil Seep but retreat shortly after the outbreak of World War 1.1912-1925. The director of Geological Survey of Uganda, E.J. Wayland, affirms availability of hydrocarbons, including oil and gas seeps, in the Albertine belt.1928; The Colonial administration and the Anglo-Persian Oil Company in a joint venture make public the plans for an Oil pipeline from L. Albert to Kampala but plans are abandoned at the onset of the Great Depression.1936 -1940. South African based African European Investment Company conducts well testing in the Semliki basin, and are stunned by the prospects, particularly the Butiaba Waki B-1 well, drilled in 1938.1948 -1951. The Colonial administration try drilling ten wells for geological correlation but encounter no hydrocarbons.1957. A Petroleum Act is approved by the colonial Legislative Council.1964. President Obote' government licences Oil giant, Shell to commence oil explorations but little work makes no headway until the government is toppled.1971. President Amin gives the exploration rights to UK' Collin Oil & Gas, and Kirkwall Associates but there is little progress.1980-1984. Government receives loan from World Bank to conduct aerial magnetic surveys of the Albertine belt. But data gathered is unconvincing for any major company to set foot on ground amidst the ongoing guerilla war.1986-1990. President Museveni defers all negotiations for exploration rights until "some Ugandans are trained" in petroleum issues to broker any deal on behalf of the country. A group led by Ernest Rubondo is sent to the UK to pursue studies in petroleum geosciences.1991 [March]; The government signs a Production Sharing Agreement (PSA) with Petrofina (a Belgian company that merged with Total in 1999) to explore oil in the Albertine Graben, but the licence expires and is not renewed in 1993 without much progress.1991 [September]; The Petroleum Exploration and Production Department (PEPD) is established.1994 ; PEPD is invited to promote the Albertine Graben as latent for oil prospect at the American Association of Petroleum Geologists' convention in Denver, Colorado, and becomes regular exhibitor at subsequent conventions.1998; Heritage champions the first ever seismic studies in the country, which data acquired was highly feasible and valuable. 2001; The government signs PSA with Australian company, Hardman Petroleum, and the UK-based Energy Africa, with each given a 50 per cent stake in exploration rights over Exploration Area 2 (north of Lake Albert).2004. Heritage is awarded a 50 percent working interest in Exploration Areas 1 (Pakwach) & 3A (south of Lake Albert and Semliki).2006. Impressive oil finds are made at Exploration Area 2 (northern Lake Albert), Hardman drills an exploration well, Waraga-1, strikes oil and gas; Tullow also strikes oil in Mputa-2 well, and Nzizi-1 in the same area. Heritage similarly discovers hydrocarbons in Exploration Area 3- Kingfisher-1.2008. The National Oil and Gas Policy is drafted and approved by Parliament. 2009. The government is dragged to Court by activists demanding for revelation of the clauses in the PSAs.2010 [May]. A draft Petroleum (Exploration, Development, Production, and Value Addition) Bill is published for public review and comment but is castigated by activists.2010 [August]. The government hires UK' consultancy firm, Foster Wheeler, to make survey about the viability of constructing a local oil refinery before staring production in 2017.2011 [October]. MPs halt any further signing of oil contracts until laws have been passed to give effect to the 2008 National Oil and Gas policy, and a constitution of a committee to probe the bribery claims.2012 [February]. Tullow signs two PSAs with the government as green light to a farm down deal with China's CNOOC and France's Total. 2012 [February]. Two oil bills are tabled in parliament: the Petroleum (Exploration, Development and Production Bill) 2012 and the Petroleum (Refining, Gas Processing and Conversion, Transportation and Storage) Bill 2012, and passed in 2013.2012 [September]. Uganda' oil volumes are announced to be at 3.5 billion and gas quantities close to 2 billion cubics.2013. The government reaches agreement with Tullow, Total and CNOOC, on the construction of a 60,000 barrel-per-day oil refinery and an oil pipeline. Parliament passes the two 2012 oil bills and are signed by the President in April and September, respectively. Government announces termination of contract with Dominion Oil Company following expiry of the PSAs signed in 2005.
(c) 2013 Nation Media Group. All Rights Reserved. Provided by Syndigate.info an Albawaba.com company
[ Back To Technology News's Homepage ]