sharing in governance of extractive industries
French oil giant Total is the latest company to make a policy statement in support of contract transparency in the extractive industries. This is the first policy statement of its kind by one of the so-called “supermajors”—the world’s largest publicly traded oil and gas companies.
Oil, gas and mining contracts agreed between companies and governments set out the legal framework for extractive projects. Publishing contracts allows citizens of resource-rich countries much-needed scrutiny of deals that can be worth billions of dollars. Disclosure also provides important opportunities for governments and companies to build public trust in the extractive industries. From an investor perspective, publication of contracts reduces the political risk that results when deals are kept secret.
The policy statement was announced in Oslo on 13 February at the international board meeting of the Extractive Industries Transparency Initiative (EITI), a global standard for the good governance of oil, gas and mineral resources that is implemented by over 50 countries. The EITI Standard requires disclosures of information along the entire extractive industry value chain, and recommends others that are in keeping with the spirit of the standard. Contract transparency is not required by the standard, but it is a recommended practice.
Total’s move is part of a wider trend. By coming out in favor of contract transparency, the company is joining ranks with mining giant Rio Tinto, as well as smaller oil companies Kosmos Energy and Tullow Oil, and lining up with a practice that is endorsed by the International Monetary Fund, the United Nations, and the International Bar Association, and required by the International Finance Corporation, the Multilateral Investment Guarantee Agency and the European Bank for Reconstruction and Development.
It is encouraging to see an increasing number of companies proactively promoting contract transparency, and surely they will be joined by more in the future.
What makes Total’s statement stand out is that the company does not simply express its support contract transparency—it goes one step further to advocate for host states to disclose their petroleum contracts and licenses. This is particularly noteworthy because many of countries in which Total works are still coming around to the practice of contract transparency. Of over 40 countries in which Total works, contracts are only publicly available in 12, including 15 EITI member countries of which only 7 currently disclose agreements.
As Total executives begin to translate policy into practice, they can start by releasing secret contracts in countries that otherwise have good records on contract transparency. One such example is Senegal, where recent official disclosures on a local EITI website do not include two contracts signed with Total in 2017. Total’s actions in these jurisdictions will quickly reveal how committed the company is to its new policy.
Contract disclosure has been gathering steam among EITI implementing countries for some time. As NRGI documented last year, over half of them—a total of 29—have already officially disclosed contracts, and more countries are joining their ranks all the time. Just this month Ghana launched a comprehensive petroleum register, while Malawi moved to publish petroleum contracts last year. Even among the two newest EITI members, Guyana recently made the decision to publish contracts, while Mexico joined already having an exemplary contract disclosure portal for its oil and gas sector.
Total’s embrace of transparency practices that are in line with the spirit of EITI stands in stark contrast to the actions of two other supermajors—ExxonMobil and Chevron. But the overall trend is toward disclosure of payments, contracts and other information critical for those in developing countries seeking to hold companies and governments to account.
Originally posted at https://resourcegovernance.org/blog/total-becomes-first-major-oil-c...
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