Oil and Gas in Uganda: The Regulatory Function

7/28/2019 Oil and Gas in Uganda: The Regulatory Function

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Oil and Gas Workshop for UgandanParliamentarians

25th-26th February 2010

THEME 4 The RegulatoryFunction


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Oil and Gas Workshop for Ugandan Legislature February 2010

Objectives & Agenda

Understand the role of the regulator and the

challenges for effective regulation

The Governance Context Regulation Checklist

Functions

Objectives

Processes

Organisational models


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Context for Regulation


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What is Regulation?

A principle rule or law designed to govern

conduct

Merriam-Webster's Dictionary of Law


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Regulation ChecklistClear Policies Are Government policy goals for the sector clear?

EnablingLaws

Are the necessary laws in place to enable policyobjectives to be achieved?

EnactingRegulations

Has the law been enacted into effective regulation?

LicenseAgreements

Are individual license agreements

enforceable and consistent with policy, law

and regulations?

CompetentRegulatoryAgencies

Are the systems and institutions in placeto monitor and ensure compliance and to achievepolicy objectives?


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Regulation, Coordination and Consultation

Judiciary

Parliament

Civil

Society

Regional

Government

Some countries chooseto create

Supreme PetroleumCouncil or equivalent

to coordinatepolicy making


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Technical Upstream Regulations covertypically

Licensing

Prospecting, Exploration and Appraisal

Activity

Development and Production Activity

Measurement and Lifting of Crude Oil andGas

Abandonment of oilfield installations Local Content Provisions

Reporting and Confidentiality


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Regulatory Objectives -Government

License obligations being met

Expenditure is justified and value for money

Industry spending maximises national benefits

Operations being carried out safely with no harm to

environment

National resources are being exploited efficiently

Government receives the revenues due to it from theproduction and sale of petroleum under the agreed

fiscal regime


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Regulatory Objectives OilCompany

Legal title

Respect for contract

Clear and simple rules

To operate within the law

Swift approvals without the need for facilitation

(corrupt) payments

Maximum operational autonomy Minimise administration costs

To adhere to corporate policies and norms


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Typical Regulatory Processes

Pre-activity Approval

Approval of work programme and budget

Monitoring of progress

Active risk management

Post activity audit

Audit of outcomes Identification and punishment of infractions


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Getting the Balance Right

Efficiency Assurance


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Too many regulatory agencies leads to

inefficiency

E&POperatingCompany

JV Partners

IndustryRegulator

Ministryof Energy

Ministry ofFinance

TaxAuthorities

NGOs

NationalAuditors

HomeRegulator

Presidency


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An effective regulator needs

Authority and Mandate

No conflict of Interest

Effective Processes

Capable People


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Upstream Regulator 4 OrganisationalModels

NOC acts as regulator

e.g. Petronas

Ministry is regulator e.g. UK

Separate Statutory Regulatory Body

e.g. Norway, Indonesia, Brazil, Columbia

NOC/Ministry share regulatory functions e.g. Sonangol


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Pluses and Minuses of Different Regulatory

ModelsRegulator Model + -

NOC Strengthens authority of NOC ineyes of IOCs Technical expertise usually in theNOC

NOC regulates itself conflictof interest NOC decision-making politicalrather than commercial

Ministry Regulator close to policy-making Strengthens Govt control overNOC

Lack of competent people Weakens NOC Regulation overly influence byshort term political issues

IndependentAgency

Shields regulator from politicalinterference Able to take a longer term viewand build competence

May not be enough resourcesfor competent NOC andregulator

NOC/MinistryShared

NOC can retain some leverageover IOCs Ministry can retain ultimateauthority but delegate some tasks toNOC

Potential for competitionbetween Ministry and NOC Usually a compromisesolution where NOC power isentrenched


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Uganda Petroleum Sector Governance - Parliamentarians Training February 2010


Indonesia Oil and Gas

Sector GovernancePresident

Min ofEnergy

Min of

Finance

Min of

State OwnedEnterprises

MIGAS

Pertamina PLN

CoreBusiness

PGN

Integrated E &P Downstream Gas Power

BPMIGAS BPH MIGAS

Upstream

Parliament

Downstream

Regulatory Function


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Indonesia Lessons Investors declining interest in exploring in Indonesia in early

2000s was brought about by

Frequent changes in Indonesias political leadership

The enactment of a new oil and gas law but slow enactment ofimplementing regulations

The issuance of new laws many of which conflict with existingregulatory framework

The ongoing restructuring of the NOC

The organisational development of the regulator BP Migas

Issues relating to regional autonomy and taxation The efforts by the GOI to increase tax revenues from the oil and

gas industry

Source PWC investor survey 2005


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Nigerian Regulatory Lessons

The Ministry of Petroleum remains essentially a civil serviceoutfit that is ill equipped to conceive and formulate the required

policies for such a complex and sophisticated industry. Theregulatory body, the Department of Petroleum Resources(DPR) is, by and large, similarly constrained being a bodytucked away within the Ministry. The most problematic,however, remains the National Oil Company, the NNPC. It issimply a typical Nigerian state institution that operates as ahuge amorphous cost centre with little or no sensitivity to thebottom line. The Oil and Gas Implementation Committee Final Report, 2008.


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Budget Approval Nigeria Current

Process


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Uganda Petroleum Sector Governance - Parliamentarians Training February 2010


Proposed New Nigerian Oil Sector

Governance ModelPresident

Ministry

PetroleumDirectorate

PetroleumInspectorate

Petroleum ProductsRegulatory Authority

National PetroleumAssets Mgt Agency

NNPC

PetroleumEqualisation

Fund

National FrontierExploration

Service

JVCompanies

IOCs


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Working Session

Consider how to enable an effective regulatory

function. How much authority should be delegated

to it? How independent does it need to be. What arethe appropriate mechanisms for ensuring itsindependence?, source of authority, etc.? How will

the management team be appointed? What are thecore skills and knowledge that it needs to have

access to. How will the regulatory function be heldaccountable?


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Regulation ChecklistClear Policies

EnablingLaws

EnactingRegulations

CompetentRegulatoryAgencies

Are Government policy goals for the sector clear?

Are the necessary laws in place to enable policyobjectives to be achieved?

Has the law been enacted into effective regulation?

Are the systems and institutions in placeto monitor and ensure compliance and to achievepolicy objectives?

LicenseAgreements

Are individual license agreements

enforceable and consistent with policy, law

and regulations?

Oil and Gas in Uganda: The Regulatory Function

Documents

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