Petroleum Policy

6. National petroleum policy

Uganda and Kenya experience particular problems with an evolving petroleum legal framework. Faced with interest among IOCs, the respective governments may act prior to drafting all-encompassing legislation and regulations. Faced with uncertain prospects and limited resources, they usually take a gradualist approach to building capacity in relevant government institutions.

Despite this, there is always a need to swiftly establish mutual trust between the IOCs and the government and to establish a predictable business and legal framework.

Communities in newly emerging oil and gas producing countries are more informed than before. This means that social impacts of sector activities, if ignored in legislation, may result in delays in the project due to objections from civil society. National content rules, although new to emerging market countries, need to be crafted in advance and done transparently to manage expectations.

Regional cooperation frameworks

Another issue of note for policy-makers is the impact of regional cooperation frameworks. While this Topic Overview mainly focuses on international and national legislative instruments, the impact of soft collaborative efforts and regional policy initiatives in petroleum resource development is highly important. This can be the case of land-locked states, where the construction of export pipelines, in agreement with transit and coastal states, requires establishing a common ground on regional policies. One example is the East African Community (EAC), whose members include Burundi, Kenya, Uganda, Rwanda and Tanzania. EAC has extensive potential for regional energy trade and cooperation for energy infrastructure projects. For example, an oil pipeline from Uganda to Tanzania is being planned, and the recent oil discoveries in Kenya and Uganda, as well as gas discoveries in Tanzania are bound to open the door to future cooperation in the region. Where there is political will, this can benefit the countries concerned. Regional cooperation is also important from a security of supply perspective, e.g. if one country’s strategic reserve of petroleum is exhausted then supplies for priority usages through emergency replenishment by a country’s neighbour(s).

Explore the International and Regional Organisations Topic Overview for a more detailed review.

Environmental aspect of the petroleum policy

Another challenge is to understand and act on the importance of environmental legislation, especially Environmental Impact Assessment (EIAs) requirements. A draft EIA should be made available to the public before a project can go ahead. Regulations should make this obligatory. Harmonisation of regional standards, policies, legal framework and regulations, the promotion of cross-border public-private partnerships and collaborative sustainability efforts are thus important components of petroleum law and policy. As the discovery and commercial development of new sources becomes increasingly challenging, the right balance of priorities also needs to be made: for instance, exploration in lakes puts biodiversity at risk and requires vigorous social, economic and environmental planning. Finally, investors entering a new market have a strong interest in assisting governments in designing the best policy and regulatory framework for the country concerned. A long-term, sustainable legal framework will provide investor security but also increase the likelihood that benefits will accrue to the country’s citizens.

Explore Environmental Management Topic Overview for a more detailed review.