RK: Welcome to #360Mentor Zulaika, Good evening to you
ZK: Thank you Robert, glad to be here. Good evening to you and to everyone
RK: Tell us, what do you do?
ZK: I am a lawyer and a partner at KAA where I head the Commercial Transactions Department. I also work with the Banking Department. I do a lot of commercial transactions, financial transactions and a lot of corporate work. I am also a member of The Institute of Chattered Secretaries & Administrators (ICSA). That’s really my space. But like everybody else in Uganda, when the oil first came up it was really exciting. At KAA, there is a very vibrant oil and gas department.
RK: What does KAA stand for?
ZK: Kampala Associated Advocates. It is the largest law firm in Uganda by partner count. And Oil and Gas is one of the things we are very passionate about. We have a very vibrant oil and gas department. I began to get seriously involved in oil and gas when I got to KAA. Previously, I was more inclined to mining but when I got into KAA, I joined oil and gas.
I worked with a couple of clients and in 2019, I was appointed to the board of UNOC.
RK: First speak English, what is UNOC?
ZK: Uganda National Oil Company. UNOC is the commercial arm of the government in all matters of oil and gas.
RK: What does that mean now?
ZK: Because oil and gas is a very new thing in Uganda, it is the first time we are discovering oil. The government wanted to have a foot and finger in the pie, so the Uganda National Oil Company was formed to lead the way in leading Ugandans into that space.
RK: This UNOC is the custodian of the business interests because government wants to be part of the business not just collecting taxes and royalties?
RK: Let’s get straight into what opportunities exist for Ugandans. First of all, just describe for us, what is this value chain that exists through which we can make money?
ZK: The journey from exploration to finally having these oil products at your gas station or petroleum products you are using comes in three different segments.
- The first segment is referred to as the upstream
- Then we’ve got mid-stream
- And downstream
UNOC as a commercial arm of the government has invested in each segment of the value chain. Now, when we talk about the upstream, we are talking about the exploration part, the drilling, the segment of the value chain where we find the oil and extract it as crude oil.
Then we have mid-stream which includes the transportation of the crude oil. The government has an interest upstream through UNOC and that interest is a 15% holding all the crude that comes out of the ground. In the mid-stream where we have to deal with the transportation of the oil is where we have the EACOP which is the East African Crude Oil Pipeline. EACOP is the company that owns the pipeline and Uganda holds a 15% in EACOP and that interest is through UNOC. UNOC is 100% owned by government.
Then we go to Downstream which is the finished products, the refining of the products and the storage of the products. In the downstream, government is going to invest in the refinery as well as the Kampala Storage Terminal where the finished products are going to be stored. The government is additionally putting up a petrol-based industrial park to kick-start this sector and to make sure that even after the oil we are still able to continue with this growth. The projects that have been chosen from the petrol based industrial park are largely things that will kick-start our existing economy much as agro processing.
When we talk about opportunities, we are talking about opportunities in these specific projects.
RK: You are saying, that for every barrel that comes out of the ground 15% of that belongs to Uganda government through UNOC, and so when it goes to the market, it will be sold as a property of the Uganda government not as Total or these other guys?
ZK: Correct. And just to add to that, so the oil companies chose to export the portion of their crude oil and the Uganda government chose to refine its portion of the crude. So that crude which is 230,000 barrels a day is going to be taken into the refinery and refined into diesel, heavy fuel oils, LPG and petroleum. So our share is not going to be exported as crude, it’s going to be refined. We are then going to be a regent player in the oil industry selling the end product.
With the pipeline, it’s like a road. It’s also a business that we have invested in. All the oil companies that will have their crude oil passing through, there is a tariff that will be charged and we have a 15% of that as well.
RK: So does that mean you will be players in the finished products market?
ZK: Yes. We will be players in the refinery as well. That finished product is going to be ours to sell. We are going to get into bulk trading. We are going to have LPG points. We are going to have heavy fuel oils which can be used to generate electricity. They can be used to make fertilizers. In fact, one of the big projects is the fertilizer plant.
RK: Let me also ask, will you also make kerosene for tadooba?
ZK: No, we will not.
RK: Zulaika, let me take you to where the public’s interest is, the money is going to start after the pipeline phase, describe to us what is involved in the phase.
ZK: The oil company could have preferred to have all the oil refined here and export finished products but they decide to export the oil in the crude form. And the Uganda government wanted to refine its portion. So this whole (Final Investment Decision) FID animal rotates around the building of the pipeline. The pipeline is the only way through which the oil can be opened up. They cannot start to drill until they have a way of taking the oil out of the country. And in order for this pipeline to be built, they had a lot of routes to choose from and they finally decided on the Tanzania route. There are so many agreements involved. Those are the ones we saw our presidents signing in April.
When we talk about the Final Investment Decision, these companies that want to invest USD 3Billion need to have certain reassurances from both the governments of Uganda and Tanzania that when they put this investment in place, the governments will not mess with it, for lack of a better word. All those agreements that are being signed, the inter-government agreements, the host agreements were to make sure that this investment is secured. There are boxes that are supposed to be ticked off by these players. And once they have ticked them off, we shall have the Final Investment Decision. That is the FID.
The FID is basically for them to bring in all this money and start production, construction so that the oil can be extracted.
RK: So let’s assume that all these agreements have been signed, the money has come. Where is this money going to be spent? Which are the areas? I am already warming up with my matooke and coffee. Can you guide us as Ugandans?
ZK: First of all, the amount of money coming in the first 5 years is USD 25 Billion. That is why I said before, this thing is going to see our GDP double. So where is this money going to?
When you talk about building a pipeline that is over 14,000 kilometres, you’re going to have a lot of people doing this work. People digging the trenches, those in telecom, electronics and all sorts of things.
There are going to be a number of camps set up in the oil region. The largest of which is 200 acres. You are looking at a population of over 5,000 workers in this area over the next 5 years. Just before you get into the actual oil, some of the opportunities are; who is going to feed these people?
RK: With 5,000 people, just catering alone is a massive opportunity.
ZK: Exactly. And it has been ring fenced for Ugandans. No other person is allowed to come in and cook food for these over 5000 people. Nobody can supply them with tomatoes except a Ugandan. Nobody can supply them with beef or onions except a Ugandan.
But there’s a catch.
ZK: In order for you to supply, you must be on the national database.
RK: Uhmmm! So where is this national database?
ZK: The database is a preserve of the Petroleum Authority of Uganda (PAU) which is the regulator of this industry. But in order not to over complicate this thing, there is a website that you go to where all this information is. First you need to register yourself.
One of the things we as Ugandans need to do is clean up our businesses. The people that need our services do not play around with taxes. So if you have a business and your taxes are not right, your paper work is not compliant, they will not register you on the national database and you will not provide the matooke even if you have the best in Uganda.
While the government has ring fenced these things for us, remember that this is a business, if someone has brought here his USD 3 Billion to spend and you are not there to take it, the government has given them the option to go to our neighbours in Kenya. So if they do not find a qualified supplier in Uganda for a certain product, and they will go to the neighbour. PAU will grant them that right.
Even if you are a landlord and you want Total to rent your house, you must be on that database. Otherwise they will not hire you. Otherwise if they use your services, it means you cannot be reimbursed by the government for their expenditure. And you have to remember this is a business. We have to show up.
RK: You’re saying people must get the governance of their businesses in order?
- Make sure your taxes are in order
- Make sure you are filing returns with URSB
ZK: If you need any sort of licenses to operate your businesses make sure you have them. If you need to go to any of the agencies like the UBOS. If your products adhere to UBOS standards, you are good to go. But you need to first get yourself onto that register.
So when we talk about opportunities, I will talk about the sector I understand best after oil: lawyers. Do you know how much work lawyers have in cleaning up peoples’ businesses? Every lawyer needs to go and look at their list of clients and see the potential they have to provide in the oil industry and start.
If you are a lawyer, a tax advisor, an auditor, all of these are the opportunities to position themselves for the oil.
You had asked me about the Kabaale Industrial Park.
This often gets lost in the discussion since everybody is thinking of the pipeline and the refinery but the Kabaale Industrial park is a petrol industrial park that the government is setting up to put the town of Kabaale in the oil region. It is about 29.5 sq. km and it is going to form the nucleus around which the economy of the oil sector is going to be built.
RK: What does that mean?
ZK: That means that the government wants to set up a second Kampala. A second economic hub. Right now, 90% of our GDP is based in Kampala. It is expected that oil is going to double the GPD. So we are going to have a second economic hub the size of Kampala in the oil region. Everything as we have it in Kampala will be in that region. This industry park is the start. The government started by having anchor projects in the park. The first of which is the second international airport which is about 65% complete now. The refinery is going to be there and almost all the businesses that government is giving priority are businesses that are the centre of out economy. So we all know that agriculture is a big one for us, government wants to use the oil money to improve the agriculture. That is why they want to build a fertilizer plant. That is why 40% of the Kabaale Industrial Park has been dedicated to agro processing. There is going to be so many opportunities in this area because that is where all these expatriates are going to be based.
Even UNOC and Total are going to have their offices in Kabaale. Even lawyers are going to have their law firms in Kabaale. Imagine Robert, if Zulaika has been told to go and spend her week in Kabaale, and I would like to have my pitsa, who is going to provide it to me? My hair? All the services need to be there.
Talk about the internet providers, the ISPs, these are going to be small hubs that need connectivity. All of these are opportunities for people to get into. When we talk about oil, we forget that it is a larger eco system. The oil industry has very strict regulations because it is high risk sector.
The people who work in this industry only work for 21 days. You are allowed to work for 21 days and rest for 21 days. Imagine someone who comes from France and is done with their 21 days of work, where is he going to go for the 21-day break? When he comes to Kampala, what is he going to do? The bars, the entertainment spaces, wineries all have to be established.
The tourist agencies, do you want this person to go back to France for the 21 days or you would want to take him to Queen Elizabeth?
RK: Someone said we look at the big expatriates that are coming, and he said, do you want us to be transporting their food and meat from Shoprite in Kampala or can you set up something at that standard near that area?
ZK: And it is possible. The industrial park has been zoned in such a way that 40% has been set aside for agricultural processing but you have a percentage set aside for offices, schools, light industries. Basically it is going to be a small little city.
RK: And we haven’t looked at the night economy and the mid t lower level consumers like drivers, auxiliary workers, what opportunities are there for them?
ZK: Let me give you an example of an opportunity that is amazing. When we get the first oil and we are refining and selling to South Sudan, Kenya and DRC, it is estimated that you are going to have over 7000 trailers leaving Uganda every day. Just imagine the logistics of;
- Each trailer needs to have two drivers. They will need to take breaks.
- At the stopovers, do they have lodges to sleep in, restaurants etc
- Are there garages to service the trucks
We need to unpack the opportunities so that people can understand the opportunities there and they can position themselves.
In terms of the macro economic benefit of the park of just the industrial park, it is going to have a direct impact on the annual GDP of USD 770 M and that is the direct money that is going to come in. It is going to have an indirect income of USD 2.1 Bn. It is going to have an induced impact of USD I.9Bn and the total impact on the GDP is USD 4.8 Bn. It is expected that there is going to be an increment of 1,559 in household incomes just because of a space of 29.5km in the oil region. They expect that it is going to result into 35,000 short term jobs and 1,250 long term jobs. We haven’t looked at the indirect ones. These are the people that ae going to be inside this park.
RK: So we have not yet talked about the urbanisation that is going to come with the routes?
ZK: This morning, my friend Nicholas Opio, asked me to talk about the social impact. There’s going to be need for social workers. You know what happens when you have all these people in one area. The health impact on the already existing or non-existing health facilities.
The opportunities are enormous. Nobody can take everything. Let no one tell you the opportunities have been taken. All you need to do is to identify and get going.
RK: Our people do not know. In the information age, there is a lot of misinformation and disinformation, there are so many things going on and the opportunities are likely to pass us by.
If you are talk to a group of young women between 25 and 32, and you want to talk to them about positioning themselves for this, what would you tell them?
ZK: One of the things I would advise anyone that wants to get into the oil industry is to educate yourself about what the industry is about. A lot of the way we are accustomed to working as Ugandans will not work for oil industry. One of the main things you have to educate yourself about is the health safety regulation. Even if you have a cleaning company or just doing the laundry, you have to understand that you cannot play with fire in this zone. You have to understand that fire is are a risk and that all your workers understand this risk.
I would really advise people to take off time and educate themselves about the health risk.it is the foundation of this industry and we cannot ignore it.
Before every meeting, you have a safety moment. In case you have a fire, this is how you go about it. There is a specific way of how you park your car. You cannot get away with some things in these spaces.
RK: We have failed to observe COVID SOPs, how are we going to manage oil?
ZK: We will manage. The only risk with COVID is dying. With oil, it is poverty. And people fear poverty more than they fear death. I am confident that they will make it work.
In addition to educating yourself about the industry, from very many of these businesses, there is going to be need to form joint ventures/consortia in order to bid and win these contracts. Because when you join hands, you get economies of scale. You get the numbers and finances that you need. In many of these cases when you try to go alone, you will not make it.
Again, the lawyers, this is a field day. We need to start thinking partnerships. We need to stop thinking small. Don’t fail to deliver because you failed to think outside the box.
Lastly, we need to make sure we build capacity. These first blocks are firsts of many. We are looking at 20 and 40 years of oil production in Uganda. When the new blocks open up, are we still going to be sitting around complaining? This is the time to build capacity but to do it, it has to be deliberate.
Comrade Otoa: At Stanbic Incubation Centre, we are noticing the same thing. There is an opportunity for everyone. There is an opportunity of food. Think about it. 15000 people eating quality food every day is hard to sustain. We need to prepare.
RK: Do you see any opportunity for money to be made in consultancy?
ZK: Agriculture is our biggest opportunity. It is a hanging fruit. We are already in it. All we need to do is to improve it.
Kiranda: In which areas should farmers in Bunyoro invest their money?
ZK: There are so many opportunities for Bunyoro, you should not limit yourself.
Noela: What happens after registration? If I have a solution that I would like to share, where do I go?
ZK: Once you have registered, the best place to go is the database, it will lead you to the companies that need your services.
Shamim K Matovu: What preparations are there right now to equip people with the value and the importance of health and safety? 2) What is the criteria of entering as a business development professional?
ZK: Just identify your profession and go to the database and think of a way of working with the companies already listed there.
Patrick: What is being done about capacity building?
ZK: There is a lot. The Stanbic Incubator has been at this for some time. UNOC is doing a lot of trainings with various partners.
Allan: How much time do we have to get ready?
ZK: You have five years when the first oil comes. But even after then, there will be more opportunities.
Haward: Does UNOC have policy framework on human rights around oil investment? How are consumer rights being protected?
ZK: UNOC is aware and very strict of this and adheres to the human rights.
All the compliance aspects of every business in this sector have to be tied to the environmental rights and human rights. One thing the financiers are emphasising is that you have to leave the communities where you are operating better than you found them. So the companies are very strict and will be strict with all their partners.
RK: Zulaika, I think for pro bono work, you have done more than we could have paid for.
ZK: Please tell Law Council so they can give me my 20 points.
RK: This is national service. You have put in your time since morning. What would be your last word to the listeners, Zulaika?
ZK: Do not listen to any weird conspiracy theories that are going around that there is no oil. The opportunities are there and it is up to you to use those opportunities or not. It is so important to educate yourself about this sector. The information is out there.
RK: Zulaika, there are only two words I can use: Thank you!
ZK: You are very welcome Robert and thank you for the opportunity.