sharing in governance of extractive industries
Written by Ines Schjolberg Marques
How stakeholders from government, civil society and industry worked together to make contract disclosure a reality.
Last month, Ghana launched its new petroleum register, which discloses a wealth of information on the companies extracting the country’s oil and the terms of their agreements with the Government of Ghana. This includes the actual contracts, outlining the legal and fiscal terms and conditions for the companies’ activities. It follows 29 EITI countries who now have published at least some oil, gas and..., allowing the public to understand the terms of such deals.
Contracts, licenses and associated agreements establish many of the commitments between government and companies in the extractive industries. Disclosure of contracts therefore allows the public, including civil society and affected communities, to determine under what terms and conditions companies extract natural resources. The journey to contract disclosure in Ghana has been possible due to combined efforts by governments, companies and civil society. Here is an attempt to tell the journey from the perspective of the EITI.
One of the things I find most exciting about the EITI Standard is that it requires disclosure of information needed to make comparisons between the rules and actual practice in the governance of the extractive sector. This is also the case for contract transparency, where the EITI requires that the government’s policy and actual practice on publishing contracts and licenses is made clear. In addition, the EITI encourages disclosure of contracts between governments and companies that provide the terms attached to the exploitation of oil, gas and minerals.
The value of highlighting policy versus practice has been evident in Ghana, where this has provided stakeholders with a useful starting point for reforms. Their EITI Reports published before 2015 highlighted that the government did “not have any policy regarding the publication of details of contracts”, and did not mention any obstacles to making such contracts public. However, it also mentioned that in practice, some contracts had been made available by the Ministry of Petroleum and certain companies, and provided links to the petroleum agreements published by Tullow Oil and Kosmos Energy.
Increasingly positive signals from industry regarding contract disclosures are showing how contract transparency is progressively becoming a global norm, and can support progress at the national level. Kosmos states on their website that “where it is legally possible and acceptable to our host governments, we also prefer to make the material terms of our Petroleum Agreements and Production Sharing Contracts publicly available”. The company has published their contracts with seven countries (including Ghana) as part of their filings made with the US Securities and Exchange Commission. Tullow also “supports disclosure of Production Sharing Agreements” and publishes these when agreed with government partners.
There are many reasons why publishing contracts can be good for companies, in particular in terms of reputational risks and building trust with stakeholders. As a Ghana EITI brief on contract transparency explains, “risks of misunderstanding are minimal, but risks of opacity are great.” Other companies are now following suit, with Total recently having announced their support for contract transpar....
Civil society in Ghana has for a long time advocated for reforms to mandate contract disclosure for the oil, gas and mining sectors (see examples here, here and here). Civil society organisations in the Ghana EITI multi-stakeholder group have also used the EITI platform to place this issue on the government’s agenda, as was found during stakeholder consultations for Ghana’s EITI Validation in 2016.
Consequently, following a push from civil society and based on the findings from EITI reporting, the 2012-2014 EITI Reports have recommended that petroleum contracts should be made publicly available. This was also a recommendation from the EITI Validation, which highlighted that there appeared to be barely any resistance from government to publishing contracts and no existing regulatory obstacles.
From EITI recommendation to government reform…
When the long-awaited Petroleum (Exploration and Production) Act was passed in 2016, it authorised the Petroleum Commission to “establish and maintain a register of petroleum agreements, licences, permits and authorisations” which should be open to the public (Section 56). It was however not clear whether the full agreements would be published, which arguably is necessary for stakeholders to fully understand the terms of petroleum operations by companies.
Ghana EITI and stakeholders were involved in the preparations of the Petroleum (Exploration and Production) Bill. Since it was passed, they have also fed into the drafting of the regulations and organised targeted activities, such as a roundtable on contract transparency in May 2017. In July 2017, the government committed to publishing the full agreements in the register. GHEITI, in collaboration with NRGI, published a briefing on Contract Disclosure in the Ghanaian Extractive Industries, which highlights the pros and cons of contract disclosure and recommends next steps for the government.
It is also clear that stakeholders not mentioned above are likely to have been instrumental in the process of supporting the government to deliver on its promise to make contracts public. This narrative does however intend to show that it is with support from key stakeholder groups that positive change can happen, from the point of identifying an opportunity for reform and turning commitments into action. With engagement from stakeholders from government, industry and civil society, the EITI can be a platform for progress on extractive sector governance.
Read more about progress made by EITI countries in thematic areas including contract transparency in the EITI Progress Report 2018, and more about Ghana and contract transparency in the GHEITI/NRGI Briefing on “Contract Disclosure in the Ghanaian Extractive Industries”. More details on the new petroleum register can also be found in this blog post by NRGI.
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