Local contractors assured on future oil contracts

July 22, 2019 in Business, Energy, Hydrocarbons, Infrastructure, Investment by Editor

Some representatives of international oil companies said many opportunities exist for the local firms, but failure to submit proper tender and bid documents worked against their chances to win contracts.

July 22— Hundreds of engineers and building contractors last Friday attended a conference about the opportunities in the nascent oil and gas sector amidst persistent concerns many of them lack the working capital and expertise to compete for contracts.

To date, Uganda has an estimated 6.5 billion barrels of crude oil located in the western rift of which about 1.5 billion is recoverable. However while local companies worry about their ability to compete with well capitalized and experienced international firms, regulators insist on the importance of being compliant. This is despite government assurances that certain contacts will be ring-fenced for local contractors.

The conference was organised by the Petroleum Authority of Uganda (PAU) in partnership with other government agencies. It is one of the efforts to prepare local firms for the development phase of the oil and gas sector with planned construction of the $4 billion East African Crude Oil Pipeline (EACOP) and a new $3.8 billion oil refinery, among other major support infrastructure.

“The PAU is looking forward to the development of the oil and gas sector in a way that will enable the sector to contribute to Uganda’s socio-economic transformation. Achievement of this goal requires decisiveness, adequate preparation and implementation of a road map that positions the sector players to reap the benefits,” Ernest Rubondo, the Executive Director of the PAU told participants.

Keynote speaker, Andrew Kasekende, a Director at ICS Engineering and Environment Limited, which is working with UK-based Worley on the Resettlement Action Plan (RAP) for the EACOP, said several challenges hinder local companies.

“From experience, the major challenges faced by local companies are lack of awareness of oil and gas standards, high cost of capital, and business uncertainty after investment,” he said.

Kasekende suggested the need to have contracts sized appropriately to meet capacity and financial capability, support to smaller sub-contractors to meet quality and Health Safety and Environmental (HSE) standards, and sub-contracting of smaller Albertine Basin companies to maximise Ugandan employment.

However, some representatives of international oil companies said many opportunities exist for the local firms, but failure to submit proper tender and bid documents worked against their chances to win contracts.

While presenting on the procurement strategy for the upcoming Engineering, Procurement and Construction (EPC) phase, Matthew Kyaligonza from CNOOC Uganda Limited said, “If you want to have a successful bid, do not submit generic tender responses; match responses to questions asked, separate proposals, especially Price from Un-priced Commercial Proposal, complete the bid proposal and submit on time.”

The conference was opened by Eng. Monica Azuba Ntege, the Minister of Works and Transport, under the theme ‘Enhancing participation of national entities in high-value Engineering and Construction contracts in Uganda’s oil and gas sector’.

She told the local engineering community and associated professional bodies on how best to harness the linkages and opportunities in Uganda’s oil and gas sector. She said the construction phase provides opportunities for Ugandan firms and individuals to offer related services and supplies.

“I have been briefed that the oil and gas sector is expected to generate $15 billion to $20 billion in investment during the next three years in various projects that will lead to First Oil. Government has put in place an enabling legal framework for the participation of Ugandans in these activities, and for your information, civil works and provision of available construction materials are ring-fenced for Ugandans,” she said.

The Minister encouraged the professionals, contractors, manufactures and suppliers with the necessary competencies and capacity to explore these opportunities.

Rubondo said, “The construction and engineering sub-sector of the economy is one of the areas which has a very significant potential to benefit from the development of the country’s oil and gas sector.  This is especially so because the construction and engineering sub-sector provides opportunities for high value participation of Uganda entities.”

Brian Tahinduka, the Sector Head for Energy and Infrastructure at Stanbic Bank Uganda said they are ready to fund up to$54 million for a single project.

“As long as you have the capacity and capability, we have the money. We are the only institution with a unique Triple A rated mark in Africa for such huge projects,” he said.

The bank is also currently offering capacity-building for small and medium enterprises (SMEs) under their Business Incubator programme to prepare them for these opportunities.

The PAU allayed the fears of local engineering and construction companies regarding bundled contracts. Peninah Aheebwa, the PAU Director, Technical Support Services outlined the law.

“Regulation 10 sub-section 3 of the Petroleum National Content Regulations states that every licensee, operator, contractor and subcontractor shall provide additional and timely information and reduce the size and complexity of the scope of works by un-bundling of contracts and formulate work packages which are affordable by Ugandan companies, Ugandan citizens and registered entities,” she quoted.

Aheebwa also emphasised the need for companies to register on the National Supplier Database, which is mandatory for companies that would like to supply goods and services in the oil and gas industry. 

Robert Kasande, the Permanent Secretary of the Ministry of Energy and Mineral Development in his closing remarks said local companies need to comply with the required standards or risk missing out on the opportunities once the various Final Investment Decision (FIDs) are taken.

“FID will surely be taken. It may be tomorrow or the other day but whatever time it comes, we should prepare and ensure that whatever you take from here, you put into practice. That way, when time for bidding comes, you are ready to participate,” he said.