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Ugandan Parliament Passes Long-Awaited Oil Bill

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Ugandan Parliament Passes Long-Awaited Oil Bill

The Ugandan parliament Friday passed the long-awaited upstream oil bill after nearly a year of back-and-forth parliamentary deliberations as the East African nation prepares to transit from oil exploration to the production phase.

Ruling National Resistance Movement party law makers voted to pass the bill after forcing through an amendment reinstating a clause that gives the oil minister powers to solely approve and revoke licenses. Stephen Birahwa, a law maker on the natural resources committee, said ruling party lawmakers had earlier reached a "compromise" with the president to reinstate ministerial powers in order "to strengthen state control in the sector".

"Oil is a very important resource and it needs to be presided by a minister with real powers," Mr. Birahwa said.

The bill, which will regulate oil licensing, exploration and development, was introduced in the house in February, but its approval has dragged on for several months, amid a bitter spat between parliament and the executive over key amendments, including the powers of the oil minister. In October, lawmakers introduced an amendment, trimming the minister's powers of approving, granting and revoking oil licenses. Government initially consented to the amendments but later backtracked, creating a bitter standoff.

George Boden, a campaigner with U.K.-based Global Witness said by reinstating the clause about ministerial powers, the minister will be allowed to negotiate deals behind closed doors with no public scrutiny, which will promote corruption.

"Despite the best efforts of some MPs, the law looks set to perpetuate the status quo of secrecy, excessive ministerial control and corruption allegations" Mr. Boden told Dow Jones Newswires. "Uganda's donors have just frozen million of dollars in aid money in reaction to serious corruption...The risk of corruption in the oil sector is far greater and this law does little to allay our concerns."

Uganda suspended issuing new licenses in 2007 to put in place enabling legislation, following several huge oil discoveries. At least six oil blocks and 10,000 square kilometers of acreage will be available for licensing once the bill is passed. Uganda's oil reserves are estimated at 3.5 billion barrels, with less than 40% of the oil region explored so far.

France's Total SA (TOT), U.K.'s Tullow Oil PLC (TLW.LN) and China's Cnooc Ltd. (CEO) are expected to start pumping as much as 200,000 barrels-a-day of oil by 2017. However, the three are yet to agree on a development plan and refining options with government.

Copyright (c) 2012 Dow Jones & Company, Inc.

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