Attorney General, Kiwanuka Kiryowa has warned Parliament of the danger of not giving Uganda National Oil Company (UNOC) exclusive powers to pay up its costs with oil, saying Uganda risks condemning its oil into debt like Nigeria that owed oil companies over US$5Bn.
He issued the warning yesterday while appearing before Parliament’s Finance Committee during the scrutiny of the Public Finance Management Amendment Bill 2021, that is seeking to give UNOC powers to spend money at source in order to meet its obligations during oil production.
Government is seeking to amend section 57 in the Public Finance Management Act 2015, to insert a new clause (5) (a) and (b) to allow UNOC to retain the proceeds from the sale of petroleum applicable petroleum agreements for the purposes of meeting its financial Obligations arising from applicable petroleum agreements in each financial year based on the approved work programs and budgets for the financial year.
Enos Asiimwe (Kabula County) asked Kiryowa why Government wants to amend the Public Finance Management Act 2015 to give exclusive powers to UNOC, “Luckily you are submitting that all this can be appropriated, so why do you need to make amendments because the amendments you are bringing are giving UNOC not to go through the appropriation process and yet you are saying these costs can be determined?”
Basil Bataringaya (Kashari North) also asked the Attorney General why Government doesn’t consider establishing a Fund upon which money will be deposited for UNOC to spend instead of usurping the appropriation powers of Parliament.
“We are trying to make sure there is cash available, why don’t we have it in a fund where the appropriation from that fund is from MPs so that it is paid, maybe it is specialized money that is set aside rather than being retained at source?” asked Bataringaya.
However, Kiwanuka said the issue of establishing an escrow account or fund was heavily discussed by Government but was dropped after realizing the volatility nature of oil business couldn’t sustain the module.
He cited an example of a barrel of oil costing US$50 per barrel, it would require Shs1.8Trn set aside for UNOC and if the price of oil rose to US$75 per barrel, that would mean Uganda is short of over Shs1Trn.
Kiryowa cited an example of Nigerian National Petroleum Company where as of January 2021 the unpaid cash calls (debt to International Oil Companies) that Nigeria owed to the companies stood at US$5.6Bn and this was negotiated extensively and after other waivers and payments has been brought down to US$1.57Bn as at end of January 2021.
“This money of oil is like in the bank, it accrues interest, it has costs, you don’t pay it, it grows. The problem with us is that the moment we miss that pitch and we lose Shs1Trn for that one year, whether we recover from it, I don’t know,” said Kiryowa.
Although, Muwanga Kivumbi questioned why UNOC can’t have a similar working like the volatile nature of the Treasury Operations vote where Shs150Bn is set aside annually for Bank of Uganda to regulate the dollar, monitor loans, meet bonds and treasury bills and the call is instant but its funds are appropriated for by Parliament.
Attorney General however rejected the comparison saying oil sector is characterized by unpredictability that doesn’t apply anywhere in the business sector.
He said that it is such risks that Government is seeking to avoid and denied claims UNOC would spend all its money at source, saying the money will only apply for cash calls so as to earn revenue.
“There is nothing as volatile in the business world like oil. It hasn’t existed and I don’t think we shall see it in our lifetime. A treasury bond, you go to the bank, buy it, it has a life, it has rules. You know exactly when it is due and you know exactly how much is due,” Attorney General said.
The Attorney General also told the Finance Committee that Government was ready to provide Parliament with copies of the Production Sharing Agreements as long as Speaker takes responsibility of the confidentiality clauses that bars Government from making agreements public.
Lawmakers had threatened not to approve the three oil bills until they have scrutunised the agreements Uganda signed with various oil companies and nations, saying the refusal to produce agreements impeded on their legislative duties.
Kiryowa Warns Of Risk Of Rejecting Oil Bills
