An analysis of the efficacy of Uganda’s petroleum fiscal regime in attracting and retaining investors in Uganda’s oil and gas sector

Abstract

A country’s ability to attract international oil companies in the Oil and Gas sector largely depends on the efficacy of the Fiscal Regime. A formidable, attractive and competitive Fiscal Regime is key to both host state and the International Oil Companies. It’s a converging arena of interests which may overlap because each may struggle to advance its interests, owing to the fact that some of the developing countries although blessed with Oil and Gas resources lack capital, technology, and human resource needed in the in the industry. It therefore becomes an inevitable venture for them to harness the resources with the involvement and contribution of foreign investors. Therefore, the only option is to attract and retain investors through a favourable fiscal regime. This study examined whether Uganda’s fiscal regime is attractive, effective or repulsive to investors in Ugandan’s Oil and Gas sector. The study analysed foreign investment in the Oil and Gas sector with the view of assessing the fiscal instruments that are applied to attract foreign investments in the Oil and Gas sector .The main fiscal regimes which have been developed include production sharing agreements, concessions , service Agreements and also analysing petroleum legal regime and how it affects investments decisions and at the sometime how it can be used to boost investments in the Oil and Gas sector .The study analysed the sustainability of Uganda’s fiscal regime by measuring neutrality, stability flexibility risk sharing and equitable aspect of measuring the efficacy of the petroleum regime in attracting and returning investors in the petroleum sector. The study also compared Uganda’s fiscal regime with other Oil frontiers Like Norway, Ghana and Kenya but a positioned was taken to taken to the effect that no country’s conditions are the same and attempts to replicate the fiscal patterns of one state in another will invariably fail but a study of other regimes can provide lessons, good practices and standards The study recommends that Petroleum Fiscal Regime should reflect the actual conditions on the ground. For it to effectively be implemented and achieve its objectives, the geological perceptivity of a given area, technical competencies, infrastructure development, and the environment should be favourable. It should therefore be designed to reflect flexibility, neutrality and stability if sustain government’s desire to maximize revenue over short and long run, and above all sustaining investment through balancing government interests and those of international oil companies to ensure that both the government gets what is due to it in taxes and at the sometime retaining and attracting investors in the sector. The regime should be internationally competitive to reflect the risks inherent in the petroleum sector relative to other sectors. Therefore, the fiscal regime should be able to respond and strike a balance between the desire by the host government to maximize revenue from the hydrocarbons and the need by oil majors to maximize profits from their investment in the oil and Gas sector.