20 NEW VISION, Tuesday, December 10, 2019 OIL & GAS NEW VISION, Tuesday, December 10, 2019 37 How much will Ugandans earn from $2ob oil projects? By Pascal Kwesiga benefits sharing,” Bategeka said. The legislator, however, said there would atrick Mugisa (not real names) be several avenues through which Ugandans leaves home before 5:00am Ugandans“ need could tap into the petrodollars, for instance, to catch a bus from Hoima through supply of goods and services. town to Nyamasoga village to be sensitised He noted that Uganda has not attained the in Kabaale parish every day. required capacity and numbers required by the The bus, belonging to the oil industry, although more welders are being company building Uganda’s to be able to churned out by the Uganda Petroleum Institute P second international airport in Kigumba and other institutions under the in Hoima, sets off at 6:10am and arrives at the understand the international accreditation arrangement. construction site within 40 minutes. “It is true that technical jobs will be for Mugisa is part of the local casual labourforce existing local foreigners. I do not know if we have a Ugandan the company ferries from Hoima to the project with requisite capacity to be a project manager site daily. The bus takes the workers back to content legal for the construction of an international airport Hoima town after work at 7:30pm. Mugisa built by an international company,” Bategeka operates an excavator at the quarrying site, framework so noted. earning about sh400,000 monthly. The local content policy for oil and gas There are nearly 1,000 Ugandans working they do not requires that 40% of the contracts be awarded on the project, most of them in low grade jobs to Ugandans. The China Railway No.5, which is such as drivers, foremen, surveyors, mechanics sign contracts upgrading the Bulima-Kabwooya section of the and lab technicians. The highest positions held Kigumba-Kyenjojo road, one of the oil roads, by Ugandans on the projects are sanitation, which could hired 19 acres of land from a family in Kihooko administrative and environmental officers, village, Buhimba sub-county in Kikuube according to our investigation. deprive them of district, at sh65m. The sh65m payment the Yet there are only about 20 expatriates family received for 19 acres translates into taking home between $10,000 and $30,000 opportunities.” sh1.15m for each acre (according to the local in monthly earnings. This means seven land rent rates) for three years if the value of expatriates earning, for instance, $15,000 each the rock is not factored in. (about sh55m) take home sh385m in monthly Works and transport minister “I think the company is renting our land earnings. This is nearly equivalent to salaries Monica Ntege cheaply and then taking out the aggregate of 1,000 Ugandans, with each taking home free of charge,” Thomas Kato, a member of the sh400,000. A substantial number of local family, said. workers on the project earn sh400,000 per The China Communication Construction month. Company, which is building the Hoima- “We work for more than 12 hours a day and aggregate needed is likely to be generated from Kakumiro-Kagadi road, paid sh50m to Joseph that is what we earn. And that money also Muhanika’s land. Birungi for leasing his estimated 10 acres of covers lunch and accommodation in Hoima If Muhanika had been allowed to sell each land to crush rocks. The land is located in The 92km Hoima-Kaiso-Tonya road. Ugandans that have been cotracted to work on such projects earn peanuts compared to their foreign counterparts town,” a worker said. tonne of crushed stones to the contractor (with Mugarama village, Buyanja county in Kibaale The investigation findings raise questions contractor meeting the cost of crushing the district. The company also leased about five on how much Ugandans would earn from the rock) for just $1 (about sh3,700), he would earn acres from Godfrey Sunday in Kisojo village, development phase of the oil industry; through over sh3.3b from just 900,000 tonnes. Then, if a Bugangaizi West in Kibaale district, for direct employment and supply of goods and 20 expatriates Ugandan contractor had been allowed to break sh63.9m. services. It is estimated that between $15b and the rock to the required standards and sell each “The stones they have taken out can build $20b will be spent during the development Each takes home between $10,000 Local content bonus: Experts disagree tonne of aggregate to SBC for only $5, he would several kilometres of roads. But what did I get phase of the oil industry. and $30,000 in monthly earnings. This earn over sh16.6b from 900,000 tonnes. for my land and the rock? It seems they only The money is expected to be spent on means seven expatriates earning, for The vice-chairperson of the Association of Uganda the health and safety environment and get into joint really earned 28% of the money spent by oil firms That would translate into over sh33b leased my land without the rock, which is the development of wells for oil production, infield instance, $15,000 each (over sh55m) Oil and Gas Service Providers, Denis Kamurasi, said ventures,” he said. during the first exploration round. if each tonne is sold at $10 by the local most important,” Sunday explains. pipelines, central processing facilities, water take home sh385m in monthly earnings. Ugandans could retain a substantial part of the oil Kasande said Ugandans with relevant capacity are Even when the local content law is in place, Ggoobi contractor. The Chinese contractors such While the companies indicated that purchase abstraction and injection plants, the refinery This is nearly equivalent to salaries of money through employment and contracts on upstream free to compete for contracts beyond ring-fenced goods noted, it may not be implemented because of the as China Communications Construction of stones from the local market would constitute and Uganda-Tanzania oil pipeline. Part of that 1,000 Ugandans, with each taking home petroleum projects. and services. “unwillingness” and vulnerability of Ugandan law Company (CCCC), which is building the between 20% and 30% of the value of the money is already being spent on building 10 oil sh400,000. “We are going to have 70% of the employees on “They can build well pads, roads in the camps and enforcers to compromise. Hoima-Kakumiro-Kagadi road, sells a tonne contracts, it could actually be 5%, according to roads and Hoima International Airport. these projects being Ugandans,” he added. Kamurasi facilities to extract water from the lake. We are now A legal expert, who asked to remain anonymous, said of aggregate to the Ugandan sub-contractors some industry analysts. The energy ministry officials have severally explained that sub-contractors with the highest local going to drill 500 wells, but we drilled 100 during the the roads and airport are direct upstream projects working on its projects for $14. The Ugandan The roads authority said earlier that it does said if only 40% of the oil projects money content propositions will get contracts. first exploration round. There is more money,” he said. and are not linked to the oil industry by the petroleum contractors are using the aggregates to build not treat what it describes as the critical oil could be retained in the economy, the country will not be below what it was previously,” he This, he noted, will motivate local and foreign sub- Ramathan Ggoobi, a senior economist, said Uganda laws. “That was an oversight on our part, but I think concrete structures on the same oil roads. roads differently from other (roads) in the would not remain the same. Their assessment added. contractors to expand local content benefits. The has trained people in areas which are not required by direct petroleum projects would not suffer from similar In order to appreciate what informed the transport network under its control. is based on the estimated 28% of the money, companies with the highest local content propositions the industry. challenges. Expatriates have to be paid well because decision of the main contractors to hire foreign “We call them critical oil roads because the which is said to have been earned by Ugandan Glaring contradictions will be established by evaluating their technical and Ggoobi added that the ones who have received they have trained for a long time to get the experience sub-contractors, some linked to (contractors), Government set a target to start oil production,” suppliers of goods and services during the first However, Karuhanga observed that having a financial proposals. “Contractors with the highest local training in fields required by the industry do not have they have and some have relocated families to work it is important to look at the sources of the the authority’s media relations manager, Allan exploration round. The oil companies said large local labourforce on a project does not content propositions have a 10% bonus. This means the requisite experience. here,” he added. However, the SBC spokesperson, loans being used to build the oil facilities. First Ssempebwa, said. they spent over $3b during that phase. The translate into increased local content benefits. they would be given free points and that would make “They have trained legal, monitoring and evaluation, Amos Muriisa, denied the findings. “Have you seen our of all, the works and transport ministry and The works and transport minister, Monica Ugandans reportedly earned the 28% thorough This reflects the picture at the airport project. them more competitive and then get the contract,” as well as human resource managers. Those with the payroll? That information is not correct. I am not in Uganda National Roads Authority (UNRA) Ntege Azuba, said probably Ugandans need providing a range of services, including clearing “You can have 80% Ugandans and 20% Kamurasi said. requisite academic qualifications have not worked position to comment on that matter now,” he added. opened tenders for the airport and majority of to be sensitised to be able to understand the and forwarding, security, camp management, foreigners on the project. But the 20% may Robert Kasande, the permanent secretary of the anywhere and these companies will not take chances,” From what is happening on the roads and airport the critical oil roads only to companies from existing local content legal framework so they catering, environmental studies, building well be taking 80% of the salaries. It is important energy ministry, said capacity has been built for Ggoobi explained. project, it is clear that claims of inadequate capacity, the UK and China. This was a condition from do not sign contracts which could deprive them pads, roads, supply of foods, transport, camp to skill people so they compete for good jobs,” Ugandans to supply goods and services. He said Uganda may not earn the targeted 40% of terms of contractors and funders and limited experience the countries that are providing the loans for of opportunities. facilities, insurance, banking and employment. he noted. “We have trained Ugandans on how to make winning the oil projects money, and wonders if it is true that among the Ugandan labour force, would continue to cut the airport (UK) and the roads (China). China “Landlords in this case have agreed and Although the oil roads and the airport are not While construction materials such as sand, bids and strategies to raise finances and how to adopt Ugandan goods and services suppliers and workers into local content benefits in the oil industry. is funding the construction of about 500km of signed the contracts. The landlords would regarded as petroleum upstream projects and gravel and stones are items Ugandans can roughly 700km of the oil roads. be able to earn more if they were the ones are not covered by the local content regulations, supply to the oil and gas construction projects, “It is not only the loan conditions. It is much supplying the stones,” she added. the money being spent on the two projects the companies building the airport and oil more than that,” an official from one of the The vice-chairperson of the Association of is part of the estimated $20b that would be roads are crushing the rocks and supplying to contractors. The suppliers of the locally harsh terms of the lenders of the money used money through local content opportunities. All each acre every year in six years. Chinese companies said. Uganda Oil and Gas Service Providers, Denis expended by the Ugandan government and oil themselves the construction aggregate. available stones are actually foreign companies. to execute the projects. these projects are being undertaken through The landlords rent out an acre to local farmers Kamurasi, said stone-crushing activities are companies during the development phase of Yet under the 2016 local content regulations Instead, it is the foreign sub-contractors that sell The main contractors are also reluctant to loans, but the conditions attached to the credit, in the area for sh200,000 for three months. This Pass the local content law supposed to create job opportunities and local the petroleum industry. for the oil and gas industry, the supply aggregate to the main contractors. sub-contract the rock crushing activities to the the supposed absence of capacities among translates into sh1.2m in 12 months. But since a Dr Lawrence Bategeka, a senior economist content benefits. Does the number of Ugandans employed on of materials such as stones is ring-fenced The Ugandan sub-contractors who need Ugandan firms because it is one of the lucrative Ugandans to take up key positions on the big part of his land is rocky and not suitable for and Hoima Municipality MP, said while the “Stones are one of the major construction the airport project and the positions they hold for Ugandans. SBC Uganda, a consortium aggregate to undertake the tasks assigned to components of the contracts and it provides projects and supply of construction materials agriculture, he could not rent out the whole of it 40% target is desirable, it might be hard to materials that are going to be needed. They represent an idea of what would happen on comprising SBI International from Switzerland them, especially on oil roads being built by the opportunities for inflating the projects’ costs, by international firms, will reduce local content to farmers. But the landlord would have earned realise it now due to inadequate capacity and need millions of tonnes,” he noted. future oil projects? and Colas Limited from the UK, is building the Chinese companies, have to buy it (aggregate) according to sources. opportunities for Uganda. more money if he had supplied the construction competences in some fields and absence of a Kamurasi said the airport and roads ought to The chairman of the Uganda Chamber of airport. Several Chinese companies are building from the main contractors for $14 per tonne. The airport and the roads are being constructed SBC hired 100 acres of land for six years aggregate to the contractor. local content law. be considered together with other oil and gas Mines and Petroleum, Elly Karuhanga, said the roads. However, the decision by the multinationals to facilitate movement of equipment needed for at sh600m from a local landlord — Enock According to the contract documents which “The Local Content Bill has not been passed petroleum industry infrastructure because they Uganda could even surpass the 40% mark. The builders of these projects leased the land to engage in the stone-crushing business and the development phase of the industry. Since Muhanika — in Nyamasoga village near SBC submitted to the works and transport into law. I know we have regulations, but they are being established to facilitate oil production. “The delay in starting production may even (with rocks) from the local landlords. They hire sub-contractors from the countries where oil is a capital intensive industry, which is not the project site. The company established a ministry, which awarded it the (contract), the are not as strong as the law and how binding The aggregate constitutes a substantial be a blessing. We have ample time to train and crush the rocks and deliver the construction they are domiciled, is partly informed by the expected to employ many Ugandans directly, quarry on the land where it crushes rocks into company will need over 980,000 tonnes of are they? Wherever natural resources are component of the construction materials on oil skill Ugandans. It may be 40% or above, but it aggregate to the projects’ sites through foreign limited capacity of Ugandan firms and the it is thought that nationals would earn more aggregate. The sh600m translates into sh1m for aggregate for the airport construction. All the exploited, the challenge always stems from projects.