MAKORE: Disclose petroleum contracts to avoid dreaded oil resource curse - Daily Nation

Disclose petroleum contracts to avoid dreaded oil resource curse

Tuesday May 15 2018

 Tullow Oil a

A worker at the Ngamia 1 oil rig in Turkana County. FILE PHOTO | NATION MEDIA GROUP 

By GILBERT MAKORE
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As Kenya inches closer to reaching First Oil, projected to be in 2022, it is not a certainty that it will fully benefit from it. Its legal, policy, institutional and practice frameworks must be optimal. A good regulatory framework would ensure that it leverages its oil for broad-based development while averting a ‘resource curse’, which has plagued many resource-rich countries.

Conditions for perpetual conflict and corruption emerge from a weak framework for managing oil resources and the windfall revenues they occasion.

One area in which there is a need for reform is contract transparency. Natural resources juridically belong to the citizenry and are held in trust by the government.

TRANSPARENT LICENCING

As the rightful owners of petroleum resources, it is important for citizens to know the conditions under which their resources are being traded and exploited.

Kenya has already made important commitments in this regard. Following a visit by then-United States President Barack Obama in 2015, the government publicly committed to developing a policy framework for transparent licensing and publication of contracts.

A member of the Open Government Partnership, in its 2016 Action Plan, it committed to disclose contractual information and revenues derived from the oil and gas industry by May 2018. But that has not been matched by changes in practice.

It is not clear what the obstacles are for the government to not follow through on its commitment, given that even oil companies and financiers have explicitly stated that they are in support of contract disclosure.

PETROLEUM CONTRACTS

A recent Oxfam study that assessed the policies of some 40 mining, oil and gas companies shows that 18 of them had made public statements in support of contract disclosure, demonstrating that the practice is becoming an accepted norm. Importantly, some of the firms that have strongly supported disclosure operate in Kenya.

Total stated that it “supports government efforts towards advancing transparency in accordance with the Extractive Industry Transparency Initiative framework, and advocates for the public disclosure by countries of their petroleum contracts and licences”.

Tullow Oil has also disclosed its petroleum agreements for operations in Ghana at the request of, and with the approval of, the Ghanaian government.

The International Finance Corporation, which provided financing for Africa Oil’s operations in Kenya, also commits to contract transparency.

SHARING CONTRACTS

It stated that its clients commit to being transparent about the terms and conditions agreed with host governments under which a resource is being developed.

Other African governments have disclosed production sharing contracts, busting the myth that doing so would prejudice the government or the companies.

Ghana recently put out a petroleum registry that discloses all contracts, licences and permits for the petroleum sector. This, it may be argued, has bolstered public confidence in the sector’s governance.

To get things right in oil resource governance, the Kenyan government should fully embrace the disclosure of information on extractives. Contract disclosure equips citizens with the information with which to hold the government and companies to account. It ensures that citizen expectations are managed and contributes to mitigating potential conflict.

POLICY IMPEDIMENT

Kenya’s opportunity to show leadership in East Africa’s growing  extractive sector would be presented by the passing of the Petroleum Bill and regulations with explicit provisions for disclosure of contracts, as well as and retrospective application.

Notably, however, there is no legal or policy impediment to disclosure of petroleum agreements — even in the absence of enabling petroleum legislation.

Mr Makore is the extractives adviser for Oxfam in Kenya, Uganda and Tanzania. Twitter handle @gilbert_makore