Unoc shareholders yet to pay Shs10bn share capital

The directors of the Uganda National Oil Company at its first annual general meeting in Kampala on 15 November 2017. Seated are Irene N. Muloni, the Minister of Energy and Mineral Development, and Matia Kasaija, the Minister of Finance, Planning and Economic Development. The shareholders of are the energy and finance ministries on behalf of the government.

The ministries of Energy and Finance, the two shareholders of the Uganda National Oil Company, are yet to pay share capital amounting to Shs10 billion.

Unoc is tasked with managing Uganda’s commercial interests in the oil and gas industry. The energy ministry has a 51% share in the company, while finance owns the rest of the shareholding. Unoc. The two own a combined 10,000 ordinary shares, with each going for Shs1 million.

The “failure by the shareholders to pay up for the share capital has greatly hindered” the companies operations, according to the Auditor General, John Muwanga. Mr Muwanga made the revelation in his audit of Unoc submitted to parliament early this year.

The audit, however, shows that the energy ministry advanced Shs1.3bn to Unoc to cover its operational expenses. The expenses mainly include hiring of new staff and paying salaries.

Unoc’s key responsibilities include managing the country’s business interests in the oil and gas industry, proposing new upstream, midstream and downstream ventures both locally and internationally, and developing expertise in the oil and gas sector. But the audit reveals that the government is not clear on how exactly the company will be financed to carry out those roles.

“For the company to duly undertake its daily operations and its obligations, as a participant in the joint ventures and production sharing agreements and government representative in the refinery and pipeline, it needs an established source of income,” the audit says.

Mr Muwanga said this failure would affect the company’s ability to carry out its obligations, thus affecting the timely completion of projects. This raises the risk that it might default on joint ventures with other international oil companies.

Late last year Unoc shareholders set government’s equity in both the proposed oil refinery crude oil export pipeline at $500m (Shs1.7trillion) and $200m (Shs710bn), respectively. But questions linger about how the money will be raised. The two public-private partnership projects will cost an estimated $7.5bn (Shs26trillion).

Unoc also wants to venture into upstream activities, mainly exploration, with interests far above what has been prescribed by the law. To do this, it intends to ride on model production sharing agreements, which prescribe a 20% state participation.

But critics have warned that could be a bad business model for a body barely three years old.