February 11 2019

Oil service providers hope to share into $20b cash

Source: Daily Monitor

As Uganda prepares for the development and production phases of the oil sector with expected investments worth $20b (Shs74 trillion) over the next five years, local service providers are upbeat, planning on how they will share into the multi-billion cash.

This was the mood during the national content conference for Ugandan companies organised by oil sector regulator, Petroleum Authority of Uganda.

The meeting, which was held at the weekend in Kampala, according to Mr Dennis Kamurasi, the vice chairperson of the Association of Uganda Oil & Gas Service Providers, discussed the huge capital requirements, capacity gaps, inexperience in business and competition.

“You can try getting the money but experience is not something you can buy,” he said, emphasising that government must define and support Ugandan companies to promote the local content policy and regulations that seek to protect local service providers from foreign companies.

The local content wording, as it is, does not explain company ownership, registration, or place of registration.
The policy also does not draw distinction between a company incorporated in Uganda, or controlled by a citizen of Uganda.
“We are not pushing for protectionist laws, but we think a policy of domiciliation is preferable over indigenisation. But to combine the two is most ideal,” Mr Kamurasi added.

In broad terms, local content is defined as “the value addition by Ugandans using Ugandan materials, with services produced by Ugandan firms” with the aim of keeping money within the country. Over the last years since discovery of commercial oil in 2006, participation of Ugandans has been a sticking issue.

Between 2006 and 2016 the country saw investments to a tune of $3.2b (Shs11 trillion) but local service providers raked in only 28 per cent of that or roughly $900m (Shs3b) mostly going to logistics, clearing and forwarding, supply chain management, catering services, air transport services (light aircraft carriers to the field) and camp management services.
With more investments in the region of Shs74 trillion expected, covering among others, development of Total E&P’s Tilenga oil fields in Buliisa and Nwoya districts and CNOOC’s Kingfisher and Kaiso Tonya fields in Kikuube and Hoima districts, respectively, a crude oil export pipeline and a refinery, local service providers want a bigger share.

According to Mr Tony Okao Otoa, the head of Stanbic Bank’s business incubator programme, which trains SMEs, local service providers are set back by challenges such as failure to adhere to standards, lack of business plans and financial records and poor banking and borrowing history, which makes it hard for them to compete favorably with either established local companies or foreign firms.