Following the recent significant discovery of
natural gas
in Tanzania, the country has emerged as a potential large gas producer
in East Africa, generating substantial interest from citizens, civil
society and politicians regarding the prospects for the resource to
propel the nation’s economic development. The government, to its
credit,
has embarked on a series of processes to develop policy and legal
frameworks that will help govern the exploration, production,
transportation and distribution of natural gas. There have been many
grievances, however, that not much has been done to enhance transparency
in thefiscal policies and contractual terms in extractives industry at
large.
A recently leaked addendum to a Production Sharing Agreement (PSA) between Statoil, a Norwegian National
Oil company
and the government, and the outbreak of public enrage that ensued,
underline the need for a systematic disclosure of all extractives
contracts in Tanzania.
We, the undersigned Civil Society Organizations (CSOs) have been following the debate and reactions by different actors about the subject with keen interest. Consequently, on the 15
th
day of August, 2014 deliberated virtually on various analyses with the
aim of providing our insights as civil society organisations and
position on the
controversy surrounding the leaked Statoil addendum with national interests at the fore.
UNDERSTAND that extraction of resources involves complex decisions, tradeoffs and long-term commitments. These decisions will be
more
credible and less subject to abuse if citizens understand the economic
rationale behind them. The bottom-line though, is that, fiscalpolicies
and contractual terms should ensure that the country gets full benefit
from the resource, subject to attracting the investment necessary to
realize the desired benefits. The Government and investors are generally
better served if there are clear rules applicable to all investors in
similar circumstances. Transparency and uniform rules help ensure that
operators know that treatment is non-discriminatory, reduce
opportunities for corruption and may reduce demands from individual
investors for special treatment.
UNDERSCORE the right to social accountability in that citizens have a
fundamental
right to obtain explanations and justifications from duty-bearers
entrusted with the responsibility for managing their natural resources.
Conversely, duty-bearers have a duty to provide justifications
regarding the decisions they make on the
exploitation of these resources.
CONCERNED about inadequate information provided to the public
leading to destructive and dangerous state of confusion regarding
natural gas and extractive industry contracts in general. A number of
concerns surround the leaked Addendum to existing PSA between the
government and Statoil poses a number of concerns:
The shallow reaction from the government and non-reaction
at all from Statoil leaves ample room for speculation and suspicions.
The government reaction issued through a
press release
by TPDC broadly purports that the terms of the said PSA are fair to the
country quoting 61% government take. The statement further accuses the
media for not being informed while making a grossly misleading statement
that without Statoil signing PSA in 2007, the 50.5 trillion cubic feet
could have not discovered, hence attributing all discoveries to Statoil!
This further raises a question whether the deviation is a
bonus
to Statoil for that? The statement provides no information about the
underlying economic rationale and assumptions applied to justify neither
deviation from Model Addendum to PSA nor the actual terms of the signed
PSA.
The conspicuous silence by Statoil on the matter that threatens not only its
corporate reputation and integrity but also that of the
home country (Norway) as champion of transparency in extractive industry.
The continued erosion of public confidence of the way
extractive sector is managed drawing devastating experience from mining
sector. If the public is to have confidence that the government
agreement with Statoil was sound based on the information they had when
signing the addendum, all relevant information should be disclosed.
Continuing secrecy on this matter that is now firmly being debated in
public exacerbates citizens’ mistrust of those entrusted with
management of the resource. A recent analysis by The Natural Resource
Governance Institute
(NRGI) indicates that it may be premature to ascertain whether or not
Tanzania obtained a good deal from the 2012 Statoil addendum given that
the original Statoil PSA of 2007 and other information that informed the
government’s calculations are still not publicly available.
The manner in which the addendum to the Statoil PSA was
brought forth to initiate this public discourse( by leaking) undermines
the integrity of government as it invites a lot of suspicion and may
encourage certain quarters to surmise that the intention was to expose
possible corruption in the said
deal.
The leak compels all stakeholders: industry, government and civil
society to begin a serious conversation about the continuing secrecy of
extractive industry contracts despite the obvious benefits of
disclosure.
To prevent an important public issue being debated on
partial, leaked information, stakeholders should begin to have an honest
discussion about the legitimacy of many resistances to open contracts
by government and extractive companies.
Is it worth noting the fact that contract disclosure is already mandatory for some companies (e.g. Swala through
stock exchange
rules) and will be mandatory for all PSAs and MDAs entered into after
2014 if the next government upholds the commitment to do so in the
current Open Government Partnership Action Plan. Why should some
companies be obliged to disclose while others are not?
Civil society, parliamentarians and citizens have been
calling for the parliamentary approval of extractive contracts after the
drafting and
negotiation
by the government. Ratification of the Statoil PSA, addendum and other
such agreements by parliament would have ensured that representatives of
citizens had ample time to discuss the merits of the contracts before
they came to effect and was another way of bringing the agreements to
the
public domain.
It also protects industry from expropriation. Government may be
apprehensive about the Statoil PSA being made public in that it may
confirm to the public that the addendum to the Statoil PSA is in fact a
‘bad deal’, arousing calls for renegotiation. This may not necessarily
be permanently harmful to either the government or the company. Due to
changing economic situations, it is common for extractives contracts to
be renegotiated regardless of their disclosure or leak. With the social
license in mind, renegotiation can enhance the durability of contracts in the long term.
· The public discourse surrounding the addendum to the
Statoil PSA reveals varied extractive contract literacy strengths and
needs. Misapprehension of contents of contracts hinders efforts to
promote transparency.
In light of the above, we CALL UPON the Government to:
- Make public the signed (original) Statoil PSA of 2007 for public scrutiny
- Make public all the signed (original) 25 PSAs and the new ones to be signed for fair treatment of all actors in the industry.
- Introduce parliamentary ratification of extractive contracts after negotiation and signature by the minister.
- Civil Society, media and government should place high
priority in ensuring the capacity of their stakeholders to engage in the
extractives debate is enhanced.
Further, we
CALL UPON:
- STATOIL to explain to the public the compelling reasons (if any) for the deviation from Model PSA
- All Oil, Gas and Mining companies operating in Tanzania
and the government to review all confidentiality provisions in the
existing extractive resource contracts for the public interest and
should refrain from endorsing such provisions in any new contract.
RECOMMEND the following to address the broader issue of extractives management:
- Enact a Freedom of Information Act.
- Establish a contracts database.
- Extractives companies should review their confidentiality policies.
Signed:
1. Interfaith Standing Committee on Economic Justice and the Integrity of Creation
2. HakiMadini
3. Policy Forum
4. Oil and Natural Gas Environment Alliance (ONGEA)
Source
http://www.policyforum-tz.org/leaked-statoil-addendum-demonstrates-how-confidentiality-intensifies-controversy