Ugandan lawmakers pass oil bill, worry about corruption

KAMPALA (Reuters) - Ugandan lawmakers passed new legislation on Friday meant to regulate the country's emerging oil sector but critics said the law would invest too much control in the hands of the executive.

The vote should help clear the way for a new licensing round for exploration blocks which has been held up by the standoff between parliament and ministers over this and two other pending oil bills tabled earlier this year.

Although opposition to the legislation in the national assembly had been bi-partisan, parliamentarians ended up voting overwhelmingly for it when an open vote was held in the chamber.

Independent lawmaker Gerald Karuhanga said the law was passed by a 149-39 margin.

"Although we have lost in parliament we've managed to expose the ill intentions of those who want to control Uganda's oil and they're being watched," Karuhanga told Reuters after the vote.

Uganda is on the cusp of becoming a top 50 global oil producer.

France's Total and China's CNOOC entered Uganda's burgeoning petroleum sector this year after both took up a third each of British explorer Tullow Oil's exploration assets for a total $2.9 billion.

However, various disagreements with the Ugandan government have pushed back production timelines.

The Petroleum Bill is meant to guarantee transparency in the oil sector, provide for a clear management structure and institute environmental safety mechanisms.

But a key contention was its clause 9 which says the oil minister shall be responsible for "granting and revoking licenses" as well as negotiating petroleum agreements.

CORRUPTION

Opponents of the bill failed to secure amendments that would see parliament scrutinize new oil deals before they were signed as well as vet candidates for senior management positions in a new national oil company and sector regulator.

Angelo Izama, a Ugandan energy analyst at the U.S.-based Open Society Foundation said the law amounted to "handing over an ATM (cash) machine" to long-serving President Yoweri Museveni and his government.

Diplomats privately say corruption and impunity thrive at the heart of government, in power since 1986 and the European Union this week became the latest donor to suspend funding to Uganda over the embezzlement of aid money.

There is broad concern that the discovery of an estimated 3.5 billion barrels of oil in the Albertine basin, of which less than half has been explored, has simply added new opportunities for graft.

"The law looks set to perpetuate the status quo of secrecy, excessive ministerial control and corruption," George Boden of the campaign group Global Witness told Reuters by email.

"The risk of corruption in the oil sector is far, far greater and this law does little to allay our concerns."

Uganda suspended licensing of new blocks late last year after parliament imposed a moratorium on new petroleum deals until the new laws were in place.

The remaining two bills cover downstream operations and oil revenue management.

The slow progress in enacting all the new oil legislation also risks slowing down the development of key oil production infrastructure and tarnishing its investor-friendly image.

Both Total's Uganda unit Tullow Oil have said the delays would not have an impact on their current operations because they were covered by existing legal frameworks.