Risk management in Tullow Oil Company in Uganda: A Legal and Policy Perspective.

ABSTRACT The major purpose of the study was examining risk management in the Oil and gas companies facing a myriad of risks in today's global marketplace especially in Uganda using Tullow oil as a case. The risks range from volatile commodity price~ which are less linked to basic supply and demand but more to global socio-economic factors, to increased health, safety and environmental pressures. These are just few examples of the serious risks and threats that can impact oil and gas companies. Technology can help mitigate these risks. Despite the negative impacts that can arise from new-found oil wealth in developing countries like Uganda, the resource curse is by no means inevitable. A number of countries - including Botswana and Norway- have managed to avoid the problem. Combating the resource curse and minimizing conflict risks associated with oil is an important part of international development agendas and there are numerous institutions and resources for governments to tum to for advice on how to do just this. Efforts have also been made to promote higher levels of oil company performance in understanding and mitigating the impacts of their own operations and investments on conflict dynamics. 

TABLE OF CONTENTS 

DECLARATION .......................................................................................................... i 

APPROVAL ................................................................................................................ ii 

DEDICATION ........................................................................................................... iii 

ACKNOWLEGEMNET ................................................................................................. iv 

TABLE OF CONTENTS ............................................................................................... v 

LIST OF CASES ........................................................................................................ ix 

LIST OF STATUTES .................................................................................................. x 

LIST OF ABBREVIATIONS ......................................................................................... xi 

ABSTRACT .............................................................................................................. xii 

CHAPTER ONE ................................................................................................... 1 

THE PROBLEM AND ITS SCOPE ......................................................................... 1 

1.0 Introduction ....................................................................................................... 1 

1.1 Background to the Study ..................................................................................... 3 

1.2 Statement of the Problem ................................................................................... 6 

1.3 Purpose of the Study .......................................................................................... 8 

1.4 Research objectives ............................................................................................ 8 

1.5 Specific Objectives: ............................................................................................. 8 

1.6 Research Questions ............................................................................................ 9 

1.7 Hypothesis ......................................................................................................... 9 

1.8 Scope ................................................................................................................ 9 

1. 9 Significance of the Study ................................................................................... 10 

1.10 Operational Definitions of Key Terms ............................................................... 10 

1.11 Review of Related Literature ............................................................................ 11 

1.12 Theoretical Perspectives .................................................................................. 15 

1.13 Related Studies ............................................................................................... 22 

1.14 Methodology ................................................................................................... 26 

v 

1.15 Research Design ............................................................................................. 26 

1.16 Research Population ....................................................................................... 26 

1.17 Research Instrument ....................................................................................... 26 

1.17.1 Limitations of the Study ................................................................................ 27 

1.18 Conclusion ...................................................................................................... 27 

CHAPTER TWO ................................................................................................ 29 

THE RISKS INVOLVED BY INTERNATIONAL OIL COMPANIES IN UGANDA ... 29 

2.0 Introduction ..................................................................................................... 29 

2.1safety health and environmental risks ................................................................. 29 

2. 2 Political risks .................................................................................................... 32 

2.3 Operational risks ............................................................................................... 33 

2.4 Market and credit risks ...................................................................................... 36 

2.5 Geological risks ................................................................................................. 38 

2.6.1 Legal principles governing risk management in the select international oil 

companies in uganda .............................................................................................. 39 

2.6.2 Upstream laws ............................................................................................... 39 

2.6.3 Environmental laws involved in the upstream sector ........................................ 40 

2.6.4 Operational laws in the upstream sector .......................................................... 43 

2.6.5 Political risks in the upstream sector ............................................................... 43 

2.6.6 Confidentiality clause ..................................................................................... 52 

2.6. 7 Security laws in the upstream sector ............................................................... 56 

2.6.8 Midstream laws .............................................................................................. 57 

2.6.9 Downstream law ............................................................................................ 58 

2.6.10 Oil price laws in downstream sector ............................................................. 58 

2.7. Conclusion ...................................................................................................... 59 

vi 

CHAPTER THREE ............................................................................................. 60 

CLASSICAL AND LIBERAL APPROACH TO RISK MANAGEMENT ..................... 60 

3.0 Introduction ..................................................................................................... 60 

3.1 Classical risk assessment framework .................................................................. 63 

3.2 Conclusion ....................................................................................................... 66 

CHAPTER FOUR ............................................................................................... 67 

COMPARATIVE ANALYSIS OF RISK MANAGEMENT BY INTERNATIONAL OIL 

COMPANIES IN UGANDA . ............................................................................... 67 

4.0 Introduction ..................................................................................................... 67 

4.1 The China National Offshore Oil Corporation ...................................................... 68 

4. 2 Total SA .......................................................................................................... 69 

4. 3 Tullow Oil PLC ............................................................................................... 71 

4.4 Conclusion ....................................................................................................... 73 

CHAPTER FIVE ................................................................................................. 74 

PRESENTATION, FINDINGS ANALYSIS AND INTERPRETATION .................... 74 

5.0 Introduction ................................................................................................... 74 

5.1 The Strategies ensured to the Risk Management ................................................ 74 

5.2 The Significance of Risk Management control by International Oil Companies 

currently operating in Uganda and compliance with relevant Regulatory Paradigm; Case 

of Tullow ............................................................................................................... 85 

5.3 Roles played by Ugandan government in creation of Legal framework for Risk 

Management by International Oil Companies ........................................................... 87 

5.4 Challenges and possible reforms in management of risk ...................................... 90 

5.4.0 Waste Management ....................................................................................... 92 

5.4.1 Inadequacy of existing Law ........................................................................... 94 

5.4.2 Corruption ..................................................................................................... 94 

5.4.3 Technical know-how and standard equipments ................................................ 95 

vii 

5.5 Conclusion ....................................................................................................... 96 

CHAPTER SIX .................................................................................................. 97 

CONCLUSION AND RECCOMENDATIONS ........................................................ 97 

6.0 Introduction ..................................................................................................... 97 

6.1 Conclusion ....................................................................................................... 97 

6.2 Recommendations ............................................................................................ 98 

6.2.1 Recommendations for the government/IOC IN Risk management ..................... 98 

6.3 Recommendations for operational risk management ........................................... 99 

6.4 Other Recommendations on Risk Management in Uganda include; ..................... 100 

BIBLIOGRAPHY ..................................................................................................... 102 

OTHER PUBLICATIONS .......................................................................................... 104 

JOURNALS , NEWSPAPER ARTICLES AND REPORTS ................................................ 105 

ELECTRONIC SOURCES ......................................................................................... 106 

APPENDIX I .......................................................................................................... 107 

INTERVIEW GUIDE ............................................................................................. 107