December 7, 2021

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UNOC to access proceeds from crude oil sale

Hon. Amos Lugoloobi, Minister of State for Planning

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Read Time:1 Minute, 29 Second

Government seeks to allow the Uganda National Oil Company (UNOC) access to proceeds from the sale of its interests in the crude oil.

The proposal is contained in the Public Finance Management (Amendment), Bill 2021 that was tabled by the Minister of State for Finance, Planning and Economic Development, Hon. Amos Lugoolobi.

Deputy Speaker, Anita Among referred the Bill to the committee on Finance for scrutiny.

The Bill seeks to enable UNOC meet all its financial obligations through the retained proceeds from the sale of its interests in the crude oil.

The proceeds from the sale of its interests will also facilitate UNOC meet obligations bone on behalf of government as provided for in the relevant contractual agreements including the host government agreement, the tariff and transportation agreement. 

The Bill, if passed, will further mandate UNOC to deposit the proceeds after expending the monies for the purposes of meeting its financial obligations and that of the state, into the Petroleum Fund.

The Bill mandates Parliament to appropriate the approved funds to fund approved investments by UNOC.

Section 56 of the Public Finance Management Act, 2015 establishes the Petroleum Fund into which all petroleum revenues which accrue to government must be paid.

This implies that all proceeds, including those arising from the sale of the state participation, should be paid directly to the Petroleum Fund.

The Act however, does not provide for the mechanism by which obligations of UNOC as a license under the Production Sharing Agreements and Joint Operating Agreements are met in a manner consistent with the key contractual, including cost recovery under the agreements.

Furthermore, the Act does not provide for payment of tariff obligations under the Host Agreement and Transportation and Tariff Agreement, before net proceeds can be deposited into the Petroleum Fund.

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