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Informing the People: Oil Contracts Demystified, By Zara Rahman, Think Africa Press, 21 November 2012


With oil economies booming in Africa, OpenOil has published a guide to help ordinary citizens understand the complex and jargon-filled oil contracts their governments have signed.

Think of the oil industry and, along with spills and environmental problems, many people think of secrecy and corruption. But transparency is increasing, albeit from a low base and poor historical record in the area. The tide is gradually turning with more and more data being put online, and there are many initiatives doing great work on making machine-readable data accessible and understandable. But until now, oil contracts have remained extremely difficult to unpack.

Limitations of transparency

There is a trend emerging in governments publishing, or putting online, the contracts they sign with international oil companies. This is undoubtedly a great success for the transparency movement globally. There are now seven jurisdictions around the world who publish their oil contracts, with more to come, and transparency of oil contracts is being written into constitutions and emerging as a best practice globally.

Publishing these contracts is the first step towards allowing citizens to know what is happening – something that will increase democratic ties between citizens and the state. But there remains one key problem – a typical oil contract is over 100 pages long and written in complicated legal jargon. It is not the kind of document that someone without a law degree, or years of specialisation in the topic, can pick up and hope to understand.

Tools to help people understand these contracts have, until now, been overwhelmingly aimed at industry employees or those with elite levels of education. These have generally taken the form of private courses (costing $3,200 per person for two days, and held in London or Abu Dhabi) or expensive legal text books aimed at the postgraduate law student. Clearly, neither of these is going to help a civil society activist in the Niger Delta make sense of the contracts governing their oil industry.

Bringing open thinking to the oil industry

To address this, OpenOil convened a group of ten world-renowned experts at the beginning of November to come together for a week and collaboratively write a book on how to read and understand oil contracts, in what is known as a ‘book sprint’.

To many, the idea of writing a book on a topic as complex and involved as oil contracts seemed crazy. Even more so, perhaps, considering that no preparation was done beforehand; no planning chapter titles, or organising who was going to write what. All work began at 9am on the Monday, and involved having a lot of faith in the facilitator of the method, who has now used the book sprint method to produce over fifty books.

The result was ‘Oil Contracts – How to Read and Understand them’, released under the Creative Commons license and thus free for all to download.

How does a guidebook help?

The terms decided in contracts can have long reaching effects, and be valid for anything up to 20 or even 30 years. And it is in the oil contracts that many factors are decided on, such as: the environmental standards that companies have to abide by, clauses relating to the effect of the project on the local economy and, most importantly for many, the amount of money that the government is going to get.

Read more at Informing the People: Oil Contracts Demystified

 
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Posted by on November 21, 2012 in Uncategorized

 

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A shadow of doubt looms over the World Bank’s Oil Negotiation Fund, By Chofor Che, 13 October 2012


The World Bank has created a new fund, which it claims is to assist African countries like Nigeria, Cameroon and Equatorial Guinea with legal advice on how to negotiate better contracts with private investors in the oil and gas industry. This World Bank fund was created at the 40th anniversary reunion of the Zone Franc Monetary Union in Paris in early October 2012 which was attended by more than 20 African state Ministers of Finance. The World Bank is optimistic that this fund would help African states guard against risks in signing oil concessions with private investors, and would also offer technical assistance to curb social risks.

Africa possesses 15 per cent of the world’s oil reserves, about 80 per cent of the platinum group of metals and 40 per cent of gold. With such great wealth, the World Bank is of the view that there is need for African states to adequately benefit from their natural resources.

According to the World Bank’s Doing Business Report of 2012, oil production has steadily grown in Africa and is expected to continue to increase at an average rate of six per cent per year in the near future.

Makhtar Diop, World Bank Vice President for Africa is of the view that the new fund would work hand in glove with the African Development Bank and other development partners in other to achieve good results. The World Bank executive added that, this fund would welcome support from other donor institutions and countries, so as to make it responsive to the concerns of oil and gas producing states in Africa.

‘It is clear that Africa sits on top of extraordinary wealth and that these natural resources could be transformational for the continent,’ Makhtar Diop concurred.

‘Being able to negotiate the best-possible deals is essential for African countries to convert more of their natural resources wealth into inclusive and sustainable growth,’ added the World Bank top Executive.

The World Bank acknowledges that utilising resource rent for development can be a serious challenge for African states. Oil concessions are very complex and African governments that negotiate such concessions may be less well-informed about geological endowments and technical details. This places oil, gas or mining companies at an advantage over African states especially as they can afford technical staff as well as highly-paid and skilled lawyers. Therefore when African governments lack sufficient capacity to manage the negotiations process, they are bound to be disfavoured when it comes to gaining from resource rent.

The World Bank is therefore of the view that the Trust Fund would be demand-driven but in the preliminary pilot phase, priority would be accorded to African states with important discoveries of oil, gas or mineral reserves, which are in the process of negotiating and concluding oil concessions. Countries with the weakest capacity like Cameroon are to benefit most from this fund.

In as much as this may be considered as a promising attempt to ensure that African states like Cameroon, Nigeria and Equatorial Guinea benefit from their resource rent especially form oil and gas, there still remains a shadow of doubt over this Trust Fund. A lot of noise has been made in the past about ensuring that Africans benefit from their natural resources to no avail. There is no guarantee that this new World Bank Fund would make a difference.

What African states need to do is to engage these private investors to include concise developmental programmes in these oil concessions, which would help develop infrastructure and employ African youth. Looking at the concessions signed between private investors and African states, there are no detailed legal provisions on how local populace should benefit from the oil deals. African governments continue to keep revenue obtained from the oil and gas industry, a secret. This should not be so. African states really do not need a World Bank fund to benefit from their own natural resources. The bone of contention lies in African states which have vehemently refused to make their local populace benefit from these oil concessions. The tendency is that once the bank accounts of state negotiators and administrators of oil rich states in Africa have been credited with a few million dollars, they do not care about the masses who continue to suffer and languish in poverty.  Instead of creating a fund, the World Bank should compel African states to be transparent with the use of money obtained from the oil and gas industry.

 
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Posted by on October 13, 2012 in Uncategorized

 

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