sharing in governance of extractive industries
As the Extractive Industries Transparency Initiative (EITI) prepares to require member governments to publish the contracts they sign with oil, gas and mining companies, an executive for French oil major Total discusses the potential benefits of contract disclosure for investors in Myanmar.
The contracts signed between governments and oil, gas and mining companies are crucial documents. They set out many of the most important terms under which investors operate, potentially including tax rates, environmental commitments and social obligations. In Myanmar, contracts have historically been shrouded in secrecy. However, global norms are changing.
Civil society organizations have long campaigned for contract disclosure. In February 2018 these efforts bore fruit: the board of the EITI, a global initiative promoting good governance in the oil, gas and mining sectors, and of which Myanmar is a member, agreed to make contract disclosure a mandatory requirement for all implementing countries from 2021 onwards.
Around the world, companies are increasingly supporting these efforts. Eighteen leading extractive industry companies have made public statements in favor of contract disclosure. These include France’s Total, which became the first major oil company to publicly support contract disclosure. Total has been operating in Myanmar since 1992 and is one of the country’s largest foreign investors.
As Myanmar EITI prepares to publish its latest report, Romaric Roignan, general manager of Total E&P Myanmar met with the Natural Resource Governance Institute (NRGI) to discuss his company’s support for contract disclosure and opportunities to promote transparency in Myanmar’s oil and gas sector. NRGI is a non-profit organization that promotes transparency and accountability in the extractive industries.
Below is an edited conversation with Roignan. The interview has been edited for clarity and content.
Sebastian Sahla: What is Total’s position on contract disclosure?
Romaric Roignan: Total supports government efforts to increase transparency through the disclosure of contracts. We believe that being a responsible investor means being as transparent as possible. We also believe that transparency will lead to more investor confidence in our projects.
Of course, we respect each country’s legislation with regard to this issue. But we believe that overall the more we can progress toward transparency around how the benefits from our operations are shared, the more it will help us as an industry to make transparent investment decisions. Transparency also helps governments to generate consensus among citizens around how the sector’s benefits are shared.
This is why we have been supporting the efforts of governments to move toward more disclosure and have been supporting the Extractive Industries Transparency Initiative [EITI] to provide a framework for this.
What are the potential benefits of disclosure for investors?
We support the disclosure of oil and gas contracts because it is a way to lift any suspicion around the terms under which we operate. We are in a complex industry. The way value is shared among stakeholders is set out in contracts. These contracts are designed to strike a balance between risks taken by companies investing in exploration and the need to ensure the government receives a proper share of the benefits.
As an industry, we are dealing with something very sensitive: the natural resources of a country. This always raises a lot of scrutiny: Are the resources being produced in a safe manner and, of course, how are the benefits shared? These are very legitimate questions.
Production sharing contracts are often structured in a complex way, involving many layers of revenues being channeled to the authorities in different ways — through royalties, through the profit share, through income tax. If we can offer a bit more clarity to the public about our work commitments and how potential revenues will be shared that will be beneficial for all stakeholders.
Did the disclosure of your contract with the Myanmar Oil and Gas Enterprise have any implications for your operations in Myanmar?
The disclosure in 2004 of our contract with the Myanmar Oil and Gas Enterprise [through court proceedings in the United States] has had no direct impact on our operations in Myanmar. More broadly, transparency is helping us to build confidence. Because of Myanmar’s history, there is a high level of scrutiny of the extractive industries from international stakeholders and local civil society. The country continues to have a sensitive relationship with information disclosure. We are engaged in dialogue with the Myanmar authorities and all stakeholders within the EITI multi-stakeholder group to progress the idea of more transparency.
The disclosure of all revenues generated by the oil and gas sector in Myanmar’s first EITI report, which was published in 2015, has had a very positive impact on how our industry is perceived in the country. EITI has allowed civil society to be more involved and to have a more realistic perception of the reality of our operations and the revenues that are generated. The EITI framework is a very good way to engage with all stakeholders in order to progress transparency in Myanmar.
Where do you see opportunities to promote contract disclosure in Myanmar’s oil and gas sector?
There is currently a draft petroleum law under debate in Myanmar’s parliament. This new law should be seen as a good opportunity for the Myanmar government and all stakeholders in the oil and gas industry to engage in a debate around transparency and contract disclosure.
We also expect a new oil and gas licensing round to be launched in 2019. This should be an opportunity to make sure every member of the industry is competing on a level-playing field in terms of transparency. In Myanmar, the award of licenses is done through competitive open bidding processes. Transparency is a natural component of this. Contract disclosure allows everyone to know that the process is fair and they are competing against the same criteria.
Note: This interview originally appeared in The Myanmar Times.
Sebastian Sahla is a Maynmar associate with the Natural Resource Governance Institute (NRGI) in Myanmar. Romaric Roignan has been with the French multinational’s Myanmar operations since 2017. He previously held various positions at Total’s headquarters in France, as well as with the French government.
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