Understanding the legal implications of contracts, investing in compliance and acquiring the right certification, are some of the things that will help a Ugandan company land a contract in the oil and gas industry.
Those were some of the tips shared by Proscovia Nabbanja, the CEO, Uganda National Oil Company (UNOC), on Tuesday, at a Suppliers Development Workshop held under the theme ‘FID and Its Implications to Ugandan Suppliers’.
The Final Investment Decision (FID) for the construction of a 1,445 km crude oil pipeline from Hoima in Western Uganda to the port of Tanga in Tanzania plus the development of two oil fields in the Albertine Graben, was announced 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.
Participants at the workshop were also taken through the bidding process, shown how to improve operational efficiency and the importance of upholding industry standards.
“The lifecycle of a contract is important to us because the best contracts can fail if they are badly managed and the worst contracts can succeed if well managed,” said Barbara Daisy Nabuweke, Head of Contracts and Negotiations, UNOC.
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 Tilenga, Kingfisher and the EACOP projects are expected to have over 60 main Tier 01 contracts; and at least a few of these have already been awarded. The majority of Ugandan companies are expected to provide goods and services as Tier 02 contractors.
Contracts worth over $300 million out of the $3.9 billion for the Tilenga and Kingfisher projects that have been presented to the Petroleum Authority of Uganda (PAU) for approval, are expected to be awarded directly to Ugandan companies.
Uganda’s approach to national participation in the oil industry is to ensure that local businesses and individuals participate so as to retain significant value from the highly specialized industry.
In general, $4.5 billion or 30 per cent of the total investment ($15 billion) in the development and construction phase is projected to go to Ugandan companies through provision of various goods, services and works.
This is why 16 categories have been ring-fenced for local companies by the PAU, including transportation, security, foods and beverages, hotel accommodation and catering, human resource management, office supplies, fuel supply, land surveying, clearing and forwarding, crane hire, locally available construction materials, civil works, the supply of locally available drilling and production materials, environment studies and impact assessment, communications and information technology services and waste management services to the extent possible.
Other UNOC executives who spoke at the workshop like Edrin Ashaba, Jessica Kyeyune and Catherine Tumusiime emphasized the need for the SMEs to be regularly informed about the latest developments in the industry, getting certified, being tax compliant plus improving their project reporting and financial management.
Daniel Kaggwa, the Managing Director, Conexus Oil and Gas, said the experience companies like his will garner from participating in the oil industry will enable them to tap into more business opportunities, both locally and regionally.
As a participating partner in the Tilenga, Kingfisher and the EACOP projects, UNOC is mandated to hold such supplier development workshops regularly to help boost local participation.
Only National Supplier Database (NSD) registered companies can bid for oil and gas contracts.