Uganda, Tanzania to bid jointly for oil contracts

Kampala, Uganda | THE INDEPENDENT | Uganda and Tanzania have stepped up efforts that will see various companies in the two countries jointly bid for opportunities in the oil and gas sector, to ward off foreign competition.

For more than a decade in the development of the oil and gas industry in Uganda, it has been an agreed position that Ugandan companies lack the capacity, both technical and financial, to take up the available opportunities.

This means that the about 3.5 billion dollars expected to be retained in the country spent in the industry, could most likely go to foreign companies.

But the Private Sector Foundation says this can be avoided if the local investors start taking up or bidding for the currently available opportunities as some projects have already taken off.

“Without a doubt, we are the only generation that will take the largest share of this oil opportunity. We are the ones that will build the pipeline, the platforms, the refineries, and all facilities that will support,” says PSFU chairman Dr Elly Karuhanga.

It is for this reason that the PSFU, the government of Uganda and the Uganda Chamber of Mines and Petroleum (UCMP) sought to team up with their Tanzanian counterparts in an attempt to fight for the opportunities jointly.

The two countries are now working to formalize the partnership and a Memorandum of Understanding is due to be signed later next month in Tanzania witnessed by Presidents Yoweri Museveni and Samia Suluhu Hassan.

The Permanent Secretary at the Ministry of Energy and Mineral Development, Irene Batebe told the launch of the partnership in Kampala that the Local Content Policy now recognizes Ugandans in Tanzania who will be supplying the East African Crude Oil Pipeline, as well as Tanzanians in similar activities in Uganda.

She said that the government has also made sure that some of the available activities are specifically reserved for local companies, including some of the goods that are required by the pipeline project.

On the financial capacity of local companies to compete for some contracts, Batebe said companies that are registered in the database will be helped by the government to access funding.

“In the Local Content Policy, the issue of funding was envisaged and we provided for a Local Content Fund. We are working with the Ministry of Finance, Planning and Economic Development, to jump start this and see how it can fit within the existing structures, to fund local enterprises,” she said.

Karuhanga says in seeking to partner with Tanzanian companies, they not only hope to gain the capacity to take on contracts but also more power to negotiate partnerships with foreign companies.

He however cautions them against exhibiting dishonesty when dealing with foreign companies because this will discredit the local companies.

The local investors are also urged to ensure they do comprehensive due diligence on the companies before partnering with them, to save the industry and the economy from possible losses to unscrupulous companies.

There are also fears that non-tariff barriers which have characterized the East African Community bloc could impede business activities between Uganda and Tanzania, especially regarding the movement of goods and persons.

These include requirements like work permits for people moving from one country to another for work, as well as travel visas for international or expatriate workers whose duties might require movement between the two countries.

The Uganda Chamber of Mines and Petroleum Chief Executive Aggrey Ashaba has implored the two governments and the EAC, in general, to continue working on removing these barriers to trade.

They also complained about the level of service at the ports which they say are not up to date with the high business activity levels created by the oil and gas sector.

Mehboob Virji, the Managing Director, East Global Logistics which handled project logistics at the ports of Mombasa and Dar es Salaam, says particularly that there are unnecessary delays at the port, just like at the border points like Malaba.

He says that unless this is worked on, it will only delay projects and also make business expensive because delayed cargo attracts demurrage costs.

He suggests for example that the port managements create systems where goods can be allowed to leave the port as documentation for clearance goes on.

The EACOP is expected to boost trade between the two countries apart from oil and gas.

Last year, there was a jump in trade but mainly regarding Uganda’s imports from Tanzania, which amounted to 743 million dollars.

Abdulsamad Abdulrahim, the chairman Association of Tanzania Oil and Gas Service Providers (ATOGS) says it is disturbing that trade between the countries has remained too low, now at just about 1 billion dollars.

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