KAMPALA (Reuters) - A proposed law to manage Uganda's oil industry lacks provisions for competitive bidding for exploration and production licences and allows for direct applications to be made to the energy minister, a U.S.-based think tank has said.
Uganda struck commercial oil deposits along the border with the Democratic Republic of Congo in 2006 and reserves are estimated at 2 billion barrels. The east African country hopes to commence production in the last quarter of 2011.
Uganda is due to table The Petroleum (Exploration, Development, Production and Value Addition) Act 2010 in parliament later in the year to pave way for resumption of oil exploration licensing rounds.
Revenue Watch Institute (RWI), which monitors accountability in industries such as oil, gas and mining, said two sections of the act would allow companies interested in exploration to apply directly to the energy minister for licences without further scrutiny.
"Most importantly, no provision exists in the bill for competitive bidding. Sections 57 and 64 ... establish that exploration and production licenses, respectively, can be awarded via direct applications to the Minister," RWI said in a report seen by Reuters late on Wednesday.
"If a bidding process is conducted transparently, it can also create stronger public awareness of the rationale behind a selection".
The government asked RWI to treat the proposed bill as preliminary.
"We deliberately sent it out for people to make comments," said Ernst Rubondo, Commissioner at the Petroleum Exploration and Production Department.
On Tuesday, Uganda gave conditional approval for the sale of Heritage Oil's assets there, paving the way for Tullow Oil to start a $10 billion project to develop Uganda's oil reserves.
The government suspended licensing in 2007, saying it wanted to first put in place robust legislation for the petroleum sector.
RWI's report, published on Wednesday, also criticised the taxation regime provided to the petroleum industry, saying it contained loopholes that could complicate revenue collection, as some terms varied from one licence to another.
