LEGAL ASPECTS OF OIL & GAS INDUSTRY

Legal Aspects of Oil & Gas Industry

Legal Aspects of Oil & Gas Industry

Introduction

Currently, the Government of Uganda is drafting several new bills related to the country's oil and gas sector—legislation that will eventually lay the foundation for the next chapter of Uganda's national petroleum program. The draft bills will further define and regulate the relationship between the government and the various oil companies currently operating in Uganda, while affecting the relationships between specific interest groups, from landowners and cultural representatives in the oil producing areas to members of the private sector. What follows is a brief description of the various statutory documents that currently shape the contours of the oil sector today. Some of these laws will be rendered obsolete when the new petroleum legislation goes into effect, while other laws will remain in effect and work in tandem with the forthcoming legislation.

Discussion Analysis

Problem in collecting the tax

This is a major challenge to revenue collection. Uganda's fiscal system is a hybrid type consisting of four main features, namely Royalty, Production (Profit Oil) Sharing, State Participation and Corporate Income Tax. For the state to adequately benefit from produced oil and gas, each aspect of the fiscal system requires stringent administration. Fluctuations in the price of oil: Need for conservative estimates on price of oil in national budget assumptions. It is important to have a feature in the PSA to deal with extremely high oil prices, to avoid the reduction of governments take as oil prices increase (i.e., a regressive fiscal system). The PSA's should allow revisions to be made to have a price-based royalty, or a royalty based on a combination of production volumes and price.

Petroleum Supply Act 2003

The Petroleum Supply Act guides all downstream petroleum activities that involve the distribution, marketing, and selling of petroleum products. The forthcoming Petroleum Act (which, as of November 2011, has yet to be tabled before Parliament) will expand beyond downstream activities to include midstream activities, as well—from oil and gas transportation and processing, to refining. Uganda Petroleum (Exploration and Production) (Conduct of Exploration Operations) Regulations 1993

These regulations currently guide the conduct of operations in the upstream petroleum sub-sector. Given their age, however, the government has recognized the need to revise them in light of global improvements in technology. Uganda's Oil and Gas Policy also mentions the need to update these regulations to account for new and growing concerns about environmental conservation and sustainable development.

The Mining Act 2003

The Mining Act regulates the distribution of rights and benefits within Uganda's mining sector, while applying guidelines as to how the sector should be administered. It also provides the licensing regime for prospecting in minerals, and is the main reference for how royalties should be divided. When discussing the issue of royalties within the oil sector, the government has frequently made reference to the divisions put forward within this Act.

The Procurement and Disposal of Public Assets Act (amended) 2011

Uganda developed a “best practices” procurement regime in response to the ...