Josephine Wapakhabulo was last month appointed the Chief Executive Officer of the Uganda National Oil Company (UNOC). Dr Wapakabulo sat down with Business Vision’s Paul Busharizi to discuss her company’s role, her plans and the prospects for oil in Uganda, below are the excerpts of the interview.
1. What prompted you to apply for the job?
a. The first thing was a strong interest in the sector. Whilst studying for my PhD I looked at the adoption of data-exchange standards and knowledge management technologies in the oil, gas and defence sectors and since then I have always had interest in that area. One of things I also enjoy is setting things up, all my jobs at Rolls Royce plc were new roles where I had to set entities up and set the standards. A combination of the sector, being able to set something up and more importantly a chance to come home and make a contribution, those I would say are the three main reasons why I applied for this job.
2. Have you had prior experience in the industry?
a. Yes, I did my PhD in a consultancy called the LSC Group which specialises in the defence and energy sectors. I was working on oil & gas and defence projects.
3. So what is UNOC and what do you see your responsibility as?
a. The Uganda National Oil Company Limited (UNOC) was established by Article 42 ofthe Petroleum (Exploration, Development and Production) Act 2013 and incorporated under the Company’s Act 2012. It is a fully registered limited liability company wholly owned by the Government of Uganda. The overall function of UNOC is to handle the State’s Commercial interests in the Oil & Gas industry and ensure that the resource is exploited in a sustainable manner. The way that works very specifically in relation to recent events, is that the Ministry of Energy and Mineral Development has issued production licenses to the three companies – Tullow, TOTAL and CNOOC. Now UNOC will come into an operating agreement with the three companies to manage the government’s 15 percent stake. So the production license was a big milestone, the next big milestone is getting that operating agreement so that we can work together towards first oil. UNOC also has a key role in the refinery and pipeline activity and we are looking into additional commercial opportunities. It is an exciting time for Uganda in this sector and as CEO of UNOC I believe our main responsibility is ensuring maximum return for our shareholders, the Ministry of Energy and Mineral Development (51%) and the Ministry of Finance and Economic Development (49%), and ultimately the people of Uganda.
4. So what will be your priority over the next five years?
a. The priority now developing our strategic plan and getting to first oil, production licenses have been issued and we have willing International Oil Companies working with us. So for me that is the immediate priority and in conjunction with that is the refinery and the pipeline activity, and also equally important over the next five years is local content development and ensuring we are developing local capacity, local skills and local suppliers. Those for me would be the main areas we need to focus on over the next five years.
5. What challenges do you forsee?
a. The promise of the oil & gas sector always has to be tempered with the uncertainties of the global economy and the fluctuating price of oil, and these are factors we must always be cognisant of. Where I forsee more challenge is on two levels, firstly, ensuring we build confidence with the public and with our partners that all the activities driven by UNOC will be transparent, well governed and at world class standard and we meet their expectations. The second challenge is in relation to how we handle the revenue we receive from the sector, which is currently estimated at $1.5billion a year. We must learn the lessons from other countries and not spend our revenues before we start earning them, ensure we save a portion of that revenue and most importantly spend the revenue on capital investment projects and not consumption.
6. But UNOC will not be involved in spending the money?
a. Part VIII of the Public Finance Management Act 2015 details the collection, deposit, management, investment, and expenditure of petroleum revenue and UNOC will have a role to play along with other government bodies. The important factor again will be transparency in the process and the investment decisions.
7. What price do we need a barrel to be at for the industry to be viable?
a. I have seen a 2015 World Bank study which showed that even at $50 a barrel we could be earning approximately $800m annually and if you go up to $90 you could be earning $1.2b. It is something we have to continually analyse.
8. How can we ensure this has wider impact on Ugandan society?
a. Industry estimates have put the figure of potential jobs created in the sector and beyond at between 100,000 and 150,000, very impressive numbers but a drop in the bucket of what we need to pull millions of people out of poverty. Therefore, what is critical will be spurring greater economic activity in the key fields of infrastructure, agricultural production and tourism development. Its potential lies not in availing the populace with cash handouts alleviating them from the need for hard work as some nations have mistakenly tried, but in its ability to provide the nation with a source of independent funding which if steered to the sectors representing Uganda’s' best potential will help spur the nation to the next level.
9. How do you see the Oil & Gas sector fitting into our middle income nation ambitions?
a. When you look at the middle income agenda I always say to people no one sector will take us there, every sector has to play its part. Having said that, the oil and gas sector will have a big part to play, and we therefore need to continue our domestic revenue mobilisation drive to complement the flow from oil and gas. We should not be excited by the flow of oil revenues and start to eliminate/abolish some taxes, reduce tax rates and subsidise some sectors like in some oil producing countries. We also need to ensure that we comply with our tax obligations to spur revenue growth and consequently meet the objectives on the National Development Plan II, Vision 2040 and our drive to middle income status.
10. Other countries have failed spectacularly despite finding oil how should we guard against that?
a. By learning as much as possible from the countries that have had these challenges and those that have done better. UNOC is not the first ever national oil company and thankfully many NOCs are willing to share experiences and our role will be to take these on board and apply them as quickly as possible. But as I previously stated, I believe the key will be our discipline in how we handle the oil revenues – ensuring we save some of the revenue, not mortgaging our future by borrowing against future earnings, and expenditure on capital investments not consumption.
11. Are you concerned that there will be interference in your job that will prevent you from performing?
a. Right now I am working with the Board to develop a very clear vision and strategy so we know where we are going and how we will achieve that vision. We plan to recruit, and once we have a solid team and the momentum has been set we should be fine. But I know we are not in a bubble, there will be external factors that influence things and we will deal with them as we go along. However, if I felt they were insurmountable I would not have put myself up for this job!