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Ugandan Contractors Want A Significant Share of Oil Contracts

JamesOne Olonya, President UNABCEC

The Uganda National Association of Building and Civil Engineering Contractors (UNABCEC) wants government to be more deliberate when enforcing national content regulations so that local contractors can get their rightful share of oil and gas contracts.

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This was the general sentiment at a workshop UNABCEC hosted in Kampala recently, under the theme, “Contractors’ Readiness to Undertake Projects in the Oil and Gas Sector”.

Following the announcement of the Final Investment Decision (FID) for Uganda’s oil and gas projects on February 1, 2022, at least $15 billion is expected to be spent in getting Uganda’s oil industry to the commercial production stage in 2025.

“Oil will be the major employer in Uganda going forward. Because the development phase comes with a lot of construction work, we organized this workshop to enable our members appreciate what the opportunities are in the oil sector,” said JamesOne Olonya, the President of UNABCEC.

At least 12 per cent of the more than UGX 40 trillion 2022/23 national budget is expected to go towards construction with a significant portion of that targeted towards oil and gas-related developments, he added.

Uganda has about 1,580 contractors – both formal and informal – with 396 of them registered with the UNABCEC. No less than 70 per cent of the members are local companies.

Uganda’s approach to national participation in the oil industry has centered on ensuring local businesses and individuals participate so as to retain significant value from the highly specialized industry.

Olonya, though, feels that more needs to be done to ensure the local content regulations are enforceable with clear repercussions for whoever does not adhere to them.

“Let us have the terms clearly defined in the financial agreements like it is with the construction of the Kampala Industrial Business Park in Namanve. With Namanve, 30 per cent of the funding goes back to the United Kingdom, where the money originates from in the form contracts and equipment purchases; then 35 per cent benefits Ugandan companies, since the project is here and the remaining 35 per cent goes to companies from the rest of the world. For oil and gas, the conditions are not well spelt out and hence can be easily abused,” he said.

The contracting process in the oil industry is mainly done through a three Tier system; the licensee contracts the main contractor (Tier 01), the Tier 01 contractors then subcontract Tier 02 subcontractors who sometimes subcontract Tier 03 subcontractors to provide some goods, works and services for their line of business.

The East African Crude Oil Pipeline (EACOP), the Tilenga and Kingfisher oil field projects are expected to have over 60 main Tier 01 contracts. The majority of Ugandan companies are expected to participate in Tier 02.

Excel Construction, a Ugandan company, which is currently undertaking civil works, well pads and access roads construction at the Kingfisher project, shared its experience working in the sector over the years.

Energy MInister Ruth Nankabirwa (top) launching Excel Construction’s works at CNOOC’s Kingfisher oil fields

The UNABCEC workshop was also addressed by Elly Karuhanga, the chairman Private Sector Foundation Uganda (PSFU) who is also the former chairman of the Uganda Chamber of Mines and Petroleum (UCMP) where he currently sits on the Board of Trustees.

While highlighting a number of opportunities like the Oil Roads, Karuhanga was dismayed at the inadequate participation of local contractors in the oil sector so far. He blamed this on a lack of vital certification like ISO accreditation, a lack of capacity to execute big contracts, inability to tender in professional bid documents and the inability of local firms to attract low-cost financing.

Edgar Byamah, the Managing Director at KCB and Ramla Nantongo Munyakazi, the bank’s Head Corporate Banking said the KCB Group had the capacity to mobilize the funding needed to support local contractors pursuing oil and gas works.

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Deep Earth
Deep Earth International critically examines developments in the extractive and energy sectors in Uganda and the wider East African region. Drawing from the vast experience of its founders who have each covered and written about these sectors for at least fifteen years, this website is the go-to platform for anyone seeking to get a better understanding of the same.

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