Oil Agreements - Uganda is contesting a key provision of its current oil agreement with the UK-based Tullow Oil in the latest dispute to delay the long-discussed $2.93 billion sale of its stake in three oil blocks to French oil Total SA and China's CNOOC.

Daily Monitor has established that two days prior to the signing of the agreements, President Museveni sent a directive through the Minister of Energy, Ms Irene Muloni, blocking the signing, which was originally scheduled for September 15.

According to sources familiar with the matter who preferred anonymity, Mr Museveni opposes a "stabilisation" clause in the agreement that the country fears could limit its share of additional cash if oil prices rise significantly from the current ones.

According to Mr Angelo Izama, the director of Fanaka Kwawote, a non-profit research group, President Museveni's move is a clear sign that he is yielding to the public demand to ensure that Ugandans get a better deal from oil. "The President has taken a nationalistic position on the clauses and that will definitely benefit Ugandans," he said.

A stabilisation clause aims at insulating oil companies from any change in oil profits.

It is a contractual clause that aims to guarantee that domestic laws with respect to investments will remain unchanged. A source said parties were already in correspondence about the issue and "a counter-proposal will be sent to the Ugandan government" for discussion.

In an attempt to argue their case, the CEOs of Total, Tullow oil and CNOOC are scheduled to fly in for a meeting with President Museveni on the matter. Although Mr Izama agrees with the President's stand to have the clauses changed, he says it should be done through negotiation with the oil companies.

Isaac Imaka & Nicholas Bariyo

The Monitor/29/09/2011