ENHANCING CAPACITIES FOR THE PROMOTION OF CITIZENS PARTICIPATION IN THE OIL AND GAS SECTOR OF AFRICA-THE CASE FOR UGANDA

ABSTRACT 

Since 2006, Uganda is bracing itself for oil and gas production and  engaged in preparing and signing Production Sharing Agreements (PSAs) with international companies. However, a major concern  for  oil  sector stakeholders  is the  current  low level  of  local gainful  participation. This concern  is  heightened  by  the  hard  fact  that  the  oil  and  gas  resource  is  non-renewable.  So implications  are  that  for  the  time  the  resource  exist,  Uganda’s  socioeconomic  setting  must sustainably gain what could be described as an share. This study therefore was concerned with investigating ways and means in which the local companies and citizens participation could be promoted towards reaping maximum possible gains. Recommendations of a strategic nature are made to Government of Uganda (GoU) and other stakeholders as advocacy points prepared from gaps found to exist in policy and implementation. This will narrow existing gaps and fast-track a pragmatic enhancement of local sector players. The objectives of the study were: to determine capacity needs for local companies and citizens to gainfully participate in the oil and gas sector of Uganda;  find  out  the  extent  to  which  existing  legal  and  policy  framework  provides  for  the participation of nationals and local companies in the country’s oil and gas sector; and to identify necessary strategies and actions for building capacities of nationals and local companies for gainful participation in the oil and gas sector. The conceptual framework presented dynamics of dependent and  independent  variables  as  well  as  the  intervening  variables.  The  independent  variable considered was: Capacity Enhancement of local companies and citizens  which  comprised  of:  Skills development curriculum for Uganda nationals; Availability of Training and Support infrastructure for Uganda Citizens (in terms of Existence of Technical and Financial  Capacity Enhancement facilities for local companies; Preferential tax regimes and other provisions providing for increased participation) capacity enhancement oriented towards increased participation of national and local companies. The dependent variable under consideration was: Participation of nationals in the Oil and Gas sector and for analysis, broken down into: the number of local companies participating in the Oil and Gas sector and the size of transactions accorded to citizens and local companies; and the number of citizens employed in oil and gas sector. Intervening variables under consideration were: Contract adherence by International Oil and Gas companies; and Readiness of National Oil and  Gas  Companies  to  embrace  local  participation.  Literature  reviewed  was  relevant  to  the working of the variables in the oil and gas dynamics in Uganda and partly in Nigeria. The research design opted was both qualitative and quantitative. Data collected from respondents was subjected to correlation analysis and represented in tables that revealed significant correlation between the variable selected. Factual data was also collected from respondents on strategic issues, synthesized and  reported  in  this  document.  On  the  overall,  the  research  design  was  guided  by  research objectives, questions and a problem. Out of a population size of 120 target respondents, a sample size  of  115  was  selected  through  stratified  and  purposive  sampling  was  employed  targeting: officials  from  Government  Ministries  Departments  and  Agencies  (MDAs);  Officials  from  Oil Exploration and Production Companies; citizens employed in the sector; members of sector civil society Advocacy groups; and members of parliament responsible for the Oil and gas sector. A pilot test was undertaken before a major launch of the main research to help check on the feasibly of  the  data  collection  tools.  Cross  tabulation  was  used  to  present  data  and  analysis  was  by Microsoft excel and SPSS. Findings and recommendations constitute: needs assessment for the oil and  gas  sector  by  GoU  machinery  or  perhaps  through  contracting  experienced  international auditing  firms  to  accomplish  the  task;  urgent  curriculum  development  to  allow  for  increased participation in the sector for citizens and local companies with suggested content as: health and safety skills broken down into: Emergency First Aid; Fire Training; Manual Handling Skills; Risk Assessments;  Working  at  Heights  and  Lifting  Operations;  Environment  awareness  and  waste management;  Forklift  Operations;  Telescopic  Handler  Operations;  Mobile  Scaffold;  and Defensive Driving.  It  is recommended that local  companies  be equipped  with  sector Business Ethics (BE); Corporate Social Responsibility  (CSR); and Exposure of local company operations successes in other oil resourced countries for the benefit of sharing and adoption of best practices. In the case of Training and Support Infrastructure for Capacitating Local Companies and Citizens Participation  it  is  recommended  that  sector  players  led  by  Government  build  sector  support infrastructure  like  schools,  colleges,  roads,  communication,  hospitals,  and  social  protection institutions. Preferential tax regime and other fiscal provisions are proposed including: tax rates on profits and dividends; Tax holidays; Tax Credits and Aid; Accelerated Tax Depreciation; and Tax loss carry forward. In the case of Participation Ratios for Citizens and Local Companies it is recommended that ratios are continuously reviewed by the Parliamentary sector committee on oil and  gas  to  reflect  promotion of  the desired  accelerated  participation  nevertheless participation ratios should be increased to reasonable and safe rates as local participants gain experience. It is recommended that Sector Reviews be made regular to enable government build a database for gaps and action plans covering the entire sector in regard to promoting citizen’s participation.  

 TABLE OF CONTENT

 Sr. Content Page  Abstract ii  

Table of Contents iv  

List of Acronyms  vi  

Chapter One: Introduction  

1.1 Introduction 1 

1.2 Background to the Study 1 

1.3 Problem statement 3

 1.4 Purpose of the Study 4 

1.5 Study Objectives 4

 1.6 Research Questions 4 

1.7 Scope of the Study 4 

1.8 Significance of the Study 5

 1.9 Conceptual frame work 5  

Chapter Two: Literature Review  

2.1 Introduction 7

 2.2 Concepts of Local Content and Citizens Participation 7 

2.3 Oil and Gas Local Content in the Promotion of Citizens Participation in Uganda 9

 2.4    Local Content: Case for Nigeria  9 

2.5    Skills Development Curriculum in the Promotion of Citizens Participation in Uganda 9 2.6    Training Infrastructure in Promotion of Citizens Participation in Uganda  10 

2.7    Existence  of  Technical  and  Financial  Capacity  Enhancement  for  Local Companies in Uganda 11 

2.8 Tax Policy for Promotion of Citizens Participation in Uganda 12 

2.9 Participation of Nationals in Oil and Gas Sector in Uganda 13

 2.10 Intervening Variables 14

 2.11 Research Gaps 15  

Chapter Three: Methodology  

3.1 Introduction 16

 3.2 Research Design 16 

3.3 Variables for the Study 16

 3.4 Sample Population 17

 3.5 Sample size 17 

3.6 Sample Selection 17

 3.7 Data Sources and Collection Methods  18 

3.8 Data Collection Tools 18 

3.9 Research Procedures 19 

3.10 Data Presentation, Analysis and Interpretation 19 

3.11 Anticipated Limitations and Mitigations 19 

Chapter Four: Presentation and Interpretation of Findings 

 4.1 Introduction 20 

4.2 Characteristics of Respondents 20 

4.3 Recruitment  of  Personnel  for  Participation  in  the  Oil  and  Gas  Sector Companies 24 

4.4 Proposed number of Sector Local Companies and Citizens 29 

4.5 External Factors 30 

4.6 Correlation 30  

Chapter Five: Conclusions and Recommedations   

5.1 Introduction 31 

5.2 Capacity Development, Local Company and Citizens participation in the Oil and Gas sector of Uganda 31

 5.3 Training  and  Support  Infrastructure  for  Capacitating  Local  Companies  and Citizens Participation 32

 5.4 Preferential tax regime and other fiscal provisions 32 

5.5. Proposed Participation Ratios for Citizens and Local Companies 32

 5.6 Continuous and Regular Sector Reviews 32    

 References 34  

Appendix 1: Confidential Research Questionnaire

  Appendix  II:  Correlation  Analysis  Between  Independent  And  Dependent Variables 39

  LIST OF GRAPHS 

 4.2.1 Analysis of Gender of Respondents 20 

4.2.2 Age-Group of the Respondents 21 

4.2.3 Marital status of respondents 22

 4.2.4 Education Level of the Respondents 23

  LIST OF TABLES  3.1 Sample Population Strata  18 

4.2.1 Gender of the Respondents 20

 4.2.2 Age group of Respondents 21 

4.2.3 Marital Status of Respondents 22

 4.2.4 Education Level of the Respondents 23

 4.3.1 Nationals and Expatriates Employed by the Oil Companies 24 

4.4 Local  Companies  and  Citizens  Participation  in  the  Oil  and  Gas  sector  of Uganda 25