The ”Cursed contracts": Uganda’s oil agreements place profit before people” The evidence

‘With production due to start within the next 12 months,the clear lack of environmental protection provisions,accountability of oil security forces and the weak economic terms are highly worrying.’

This report aims to provide an in-depth analysis of Uganda’s Production Sharing Agreements (PSAs) covering oil development in the Albertine Graben. PLATFORM has investigated the contract terms relating to economics, sovereignty, human rights and the environment. We examine relevant paragraphs in the Ugandan context, in relation to current oil company practice in Uganda and in comparison to contract terms in other countries. It explores the balance of rights and responsibilities between the Ugandan government and the oil companies, and who carries which risks.Until November 2009, the content of the Production Sharing Agreements remained a closely guarded secret, with both the Ugandan government and the oil companies opportunistically only releasing decontextualised snippets. PLATFORM obtained and released draft copies of Heritage’s2004 Block 3A PSA (containing a comparison with PSA terms for Block1 and Block 2), Dominion’s 2007 Block 4B PSA, and a draft of the Tullow Block 2 PSA. A number of sources, including off-the-record  , a signed statement from the Ministry of Energy, condential audit reports and investment bank analyses, have conrmed that these draft versions of the contracts are indeed very close, if not identical, tothe signed PSAs. This report is based primarily on clauses from the Block3A contract.New and larger oil companies are trying to buy into Ugandan oil in 2010.Heritage Oil has invited Italian company ENI to buy its stake, while Tullow is apparently supporting a rival bid by US giant Exxon. These oil majors are aiming to buy out Heritage’s holdings directly, which means they would avoid any renegotiations or the need to go through the Ugandan government. However, this acquisition presents an opportunity to raise new concerns about the existing terms of the contracts that are being bought into. It is in that context that the analysis and urgent recommendations made in this report need to be campaigned upon.Civil society organisations in Uganda continue to bring legal challenges to ensure that the full PSAs are made public. There are currently three suits outstanding against the government, from the African Institute for Energy Governance, Greenwatch and the Daily Monitor newspaper, all using the Access to Information Act.Apart from revealing those parts of the oil agreements that are not yet in the public domain, particularly with regard to security provisions, these law suits have the potential to create an important legal precedent.At the same time, it is important that the information that is currently available – however incomplete – is used now to create the conditionsfor renegotiation and a more informed critique of both the government and the companies involved. With production due to start within thenext 12 months, the weak economic terms and the clear lack of both environmental protection provisions and accountability of oil securityforces are all highly worrying

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