Oil & Gas News

Why UNOC Will Spend At Source

DEI – The Uganda National Oil Company (UNOC) will be allowed to retain a portion of the proceeds from the sale of petroleum products following the passing of the Public Finance Management (Amendment) Bill, 2021.

The amendment of the Public Finance Management Act, 2015, followed concerns that the law did not provide a mechanism for UNOC as a licensee to meet its financial obligations under different contracts. The same law would constrain the national company when it came to meeting its tariff obligations under the Host Government Agreement (HGA) and Tariff and Transportation Agreement (TTA) before net proceeds are deposited into the Petroleum Fund. The PFMA, 2015 called for all the petroleum revenue to be deposited into the Petroleum Fund.

“The committee agrees that UNOC can retain some money at source. This is intended to mitigate the risk of money being remitted to the Petroleum Fund and then is used for other competing demands. Retaining revenue at source is the considered opinion of the committee that this will assure partners in the joint venture that, in any case, money is available,” said Keefa Kiwanuka, the Chairperson of the Committee on Finance, Planning and Economic Development.

Dr Keefa Kiwanuka

However, the Committee also advised that whatever portion of the proceeds retained by UNOC would only be used after approval by Parliament.

Last month, members of the Civil Society Budget Advocacy Group (CSBAG) and the Civil Society Coalition on Oil (CSCO) called on Parliament not to amend the PFMA, 2015 arguing that Uganda’s annual budget process was sufficient enough to accommodate any emerging financial needs of all government agencies or companies like UNOC.

“Furthermore, there are already existing agencies like the Uganda Revenue Authority (URA) who can spend at source, to enable them to meet their urgent expenditure obligations, but with clear guidelines. Parliament should consider the URA Act, which allows URA to spend at source on authorization of the Minister, an amount not exceeding that appropriated by Parliament in any financial year. If adopted, this can facilitate UNOC to meet its obligations without any interruptions,” they said, in a statement.

Reacting to the CSOs’ concerns, Ali Ssekatawa, the Director Legal and Corporate Affairs at the Petroleum Authority of Uganda (PAU), had noted that since UNOC was a company incorporated under the Company Act it could not operate like any other government department.

“What the Civil Society are demanding is to have UNOC operate like a Corporation, Agency or Authority of Government. This cannot be the case because UNOC as a company carries out its business like any other private entity,” Mr. Ssekatawa clarified.

Adding, “The amendment also enables UNOC to pay its share of the transportation fees without attracting penalties. That is how all National Oil Companies (NOCs) operate; since they are not statutory agencies.”

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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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