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Uganda’s oil and gas sector receives a substantial boost as PAU approves contracts totaling $7 trillion for local companies, signaling promising growth opportunities.

Following the announcement of the Final Investment Decision (FID) in February 2022, the Petroleum Authority of Uganda (PAU) has approved contracts valued at approximately $7.16 billion (shillings 28 trillion).

Of this amount, nearly $1.8 billion (shillings seven trillion) worth of contracts have been allocated to Ugandan companies, currently progressing through various stages of execution.

Gloria Sebikari, PAU’s corporate affairs manager, anticipates a rise in contract numbers once construction commences on the East African Crude Oil Pipeline (EACOP).

“Most of the contracts awarded thus far pertain to the upstream sector, yet we anticipate an escalation in both the quantity and worth of contracts for Ugandan firms with the commencement of full-scale construction of EACOP,” stated Sebikari.

This disclosure occurred on Thursday, March 21, 2024, during a meeting held at Petroleum House, Entebbe in Wakiso district, between representatives from the Uganda Chamber of Mines and Petroleum and PAU officials. The purpose of the meeting was to address challenges encountered by entities within the oil and gas sector.

National Suppliers Database (NSD) Update

In order to optimize the benefits of ongoing oil and gas endeavors, PAU is in the process of updating its National Suppliers Database (NSD), urging interested entities and individuals keen on supplying goods and services to the sector to register.

In February 2024, 113 entities applied, comprising 97 Ugandan entities and 16 foreign entities. The NSD is annually published on the Authority’s website, with companies mandated to renew their registration every three years. The NSD 2024 presently features over 3,000 qualified entities, comprising 2,389 Ugandan and 612 foreign entities.

Over 360 companies have directly secured contracts from licensed oil companies (Tier 1 contractors), with 300 of these being Ugandan entities, constituting 83% of the total. Moreover, more than 1,400 companies have obtained contracts from Tier 1 contractors (Tier 2 subcontractors), with several others involved at the Tier 3 level.

Peninah Aheebwa, PAU’s director of economic and national content monitoring, underscored the prioritization of National Content with an emphasis on value retention.

“We endeavor to retain maximum value within the country. In situations where Ugandans lack the requisite skills and experience, we encourage them to establish Joint Ventures (JVs) to compete for contracts at various project development stages,” stated Aheebwa.

She highlighted that a total of 120 such joint ventures were assessed, with 54 (45%) approved by PAU to undertake multiple awarded contracts. The cumulative value awarded to JVs since the FID announcement stands at $260 million (approximately shillings one trillion).

Employment Statistics

With regard to employment, the sector presently engages 13,067 individuals, of whom 11,752 (90%) are Ugandans. Licensees directly employ 1,018 individuals, with 68% being Ugandans, while contractors and subcontractors employ 12,049 individuals, with 92% being Ugandans, including 4,442 from local communities.

Furthermore, 554 small and medium-sized enterprises have undergone training by PAU on identifying and seizing business opportunities in the oil and gas sector since 2021. This initiative was conducted under a US$ 500,000 Business Linkages Project in collaboration with the African Development Bank (AfDB) and implemented in the EACOP districts.

Challenges and Progress

Challenges encountered in implementing national content in the country’s oil and gas sector encompass limited skilled manpower in certain professions and enterprises, insufficient affordable and patient capital, prolonged payment periods, and geopolitical tensions affecting supply chains.

Aheebwa indicated that the authority is actively engaging relevant stakeholders to ensure compliance with legal requirements, settlement of arrears for contractors, and enhancement of skills for individuals and enterprises.

Significant strides are being made in addressing these challenges, with the regulatory framework under review to incorporate deterrent measures against emerging issues such as delayed payments.

The banking and finance sector is collaborating with industry players to tackle challenges related to inadequate capital.

Aheebwa reiterated PAU’s commitment to augmenting national participation in Uganda’s oil and gas endeavors. PAU is collaborating with all stakeholders to ensure value creation and retention from oil and gas activities within the country.