Oil sector decisions need to be timely in order not to delay process—Total Uganda boss

By Haggai Matsiko

Loic Laurandel served as Total Exploration & Production General Manager for four years. The Independent’s Haggai Matsiko spoke to him about his tenure before he left for Bolivia.

As you depart, if someone asked you, `how is the oil sector in Uganda?’ what would be your summary?

I would say that we are ready for the next phase, the implementation phase. I would say that I am confident that what we have achieved will pave the way for a bright future.

What are those amazing things you experienced in Uganda in your line of business and dealing with people?

I mean operating in a national park is quite an adventure; I was in a game drive every time I was visiting the facilities and people in the national park, which is quite unusual. Regarding people, everybody is very accessible, the President, government officials, so we could interact quite easily.

Apart from delivering the Industrial Business Survey (IBS), what are some of the other achievements you have made in your four years here?

We delivered as promised the appraisal campaign, cable-less seismic; we set up a subsidiary and recruited more than 160 staff who are being trained. In operations—drilling—we had a high success rate. We used high technology – 3D, horizontal drilling and minimised environment impact during operations.  On local Content, 60 percent are local staff, 73 percent of our contractors are Ugandan suppliers. We had excellent social and stakeholder relations. We made a lot of progress in terms of interfacing, communicating with the civil society, communities, MPs and this is very important because I think as a result the level of awareness on oil issues has risen significantly over the four years.

When we last talked, you were enthusiastic, Total had submitted a Field Development Plan (FDP)—what is the progress?

Total has submitted one FDP for Ngiri field. One FDP is to be submitted in June and three more FDPs to be submitted by the end of the year. Government is currently in the process of reviewing the Ngiri field FDP.

There is something Duncan Clarke, an international advisor to oil companies and governments calls resource nationalism; a situation where governments exceedingly push for national interest and in the process, stand in the way of prudent commercial decisions. Is it something you have interfaced with in Uganda?

In the oil industry, you have different actors, on one hand you have governments, and on the other hand, you have industry players, the companies. And a good contract gives the two parties what they are looking for, which makes them happy. We understand that governments want to secure high revenues for the future, oil companies want to get reasonable returns on what they have invested. Once you strike this type of deal, normally easy life should go ahead.

The deadlocks over negotiations, how have they affected our negotiations?

We conducted two tasks in parallel. One was exploration and appraisal operations and in the meantime, we were negotiating the Memorandum of Understanding, which as I said, taking a year to discuss this type of MoU is not unusual, it had no interaction with what we were doing on the ground.

What sorts of sticking points are you dealing with as far as the implementation of the MoU is concerned?

I mean, in terms of implementation, we are working on the planning itself, for instance, what is required in the construction of the process facilities, we need to carry out engineering studies. We need to discuss commercial and financial issues, environmental issues, the interaction between the different fields and blocks. You have a lot of aspects.

When do you see this round of negotiations ending?

I don’t want to call it negotiations because in negotiations, it means that you have two parties confronting each other. This is more of joined brainstorming or workshop to settle the processes until the start of construction. I think by the end of the year, we should have made significant progress.

There is a lot of debate on when Uganda can expect first oil, 2019 seems to be the year everyone is looking at—why does it have to take up to 2019, how long will construction and transportation of the required construction materials take?

I don’t know where 2019 comes from, I haven’t said it. The construction phase alone could take about three years, to transport things from Nairobi it could take a few days but we need a lot of means to transport equipment, for instance, between 800 and 1000 trucks, which are not available for the time and it was the purpose of the Industry Business Survey (IBS), it was done to identify what is needed to satisfy, for instance, logistics requirements.

What are those things you feel need to change about the way government deals with investors like Total?

With time, I think we are building confidence with the government. When two parties trust each other, everything is simpler in terms of decision making. It is important that we make sure that decisions and approvals are made in a timely manner in order not to delay the process. A sustainable and attractive fiscal regime is fundamental for current and future investors and to attract funds. Upgrade of infrastructure such as roads, which the government is doing is also good.

There are reports that one of the companies that had put in a bid for the refinery withdrew because they were told by one of the oil companies that they could not guarantee the volume of feedstock required for the refinery that is being talked about? This issue about the feedstock, how critical is it to the refinery debate?

I mean, there is nothing critical and I am surprised about what you are saying because to my knowledge there is an obligation to supply the refinery, this is clearly stated in the MoU and we have oil enough to supply the refinery, so there are no issues.

Even if it is a 60,000 barrels per day refinery?

As you know the refinery will be built in two phases, the first phase 30,000 and another 30,000 later and the MoU is clear that there is an obligation to supply both.

In what state do you leave Total E&P in terms of adherence to environmental standards, opportunities for Ugandans, and profitability?

Today, in terms of standards under my jurisdiction, I deploy the highest standards in terms of environment, so our people are used to work according to the highest standards in the oil industry.

In terms of profitability, we cannot talk about profitability today while in the investment phase. This is something we will be able to talk about when we start production.

In terms of taxation, you have been having problems with the tax authorities here, what needs to be done?

The tax regime should be quite similar to what it is in most of the producing countries. For instance, in terms of VAT, as it has been the case for big energy projects like Bujagali, these projects are exempted from paying VAT because VAT is a tax for consumers not investors. So this is the type of discussion that we have been having with the government, I am confident that we will reach an acceptable solution so as to make this project profitable, then we will be able to talk about profitability.

President Museveni has consulted the South Koreans on the refinery and as you know they have some of the world’s biggest refineries, how would the South Koreans fair as partners in Uganda’s oil sector?

I have no doubt that they would be good partners, as you know the South Koreans are very good in the refinery sector, they could show a high level of expertise, they definitely would be good partners.