The Association of Uganda Oil and Gas Service Providers (AUGOS) has issued a cautionary message, emphasizing the challenges faced by Ugandans aspiring to supply the oil and gas sector. AUGOS Vice Chairman, Dennis Kamurasi, warns that while securing contracts may be exciting, the real difficulties arise during contract execution.
According to Kamurasi, winning bids initiates a competitive pricing scenario with hundreds of other companies, leading to thin profit margins. He stresses the need for careful planning, high startup capital, a consistent cash flow, and a reliable supply of goods to overcome barriers in supplying the sector.
Sharing personal experiences, Kamurasi mentions that supplying the sector involves delivering substantial quantities, citing an example where a catering service provider could be required to supply 8,400 meals at one camp for just six days. He advises inexperienced suppliers to seek partnerships with established companies that have the necessary infrastructure.
Kamurasi acknowledges the lack of capital as a significant barrier for local suppliers and encourages the creation of strategic partnerships. He suggests humility in accepting manageable tasks and a willingness to learn to overcome challenges in the industry.
The Vice Chairman points out late invoice payments as another hurdle, indicating that it takes an average of 45 days for an invoice to be paid. Furthermore, the practice of bid bonds and performance guarantees on bid submissions remains a challenge, as it ties up capital for an unspecified period, causing financial strain on entities.
In response to these challenges, the government had previously announced the creation of a local content fund to assist local suppliers, but its operationalization is pending. TotalEnergies has also urged suppliers unable to meet obligations to contact the company in advance to prevent issues seen in previous situations.
As of now, AUGOS reports that only 23% of the three billion dollars invested during the nine-year preproduction of oil has been retained in the country, emphasizing the need for local suppliers to overcome these challenges for the sustainable growth of the sector.
