No More Secret Deals

Oil & Gas
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Wednesday, February 27, 2019  09:24 AM / by Ian Gary* / Image Credit: EU Referendum

 

Why a decision in Ukraine this week could change how communities rich in oil, gas, and minerals shape their own destiny.

 

There’s something powerful about revealing something hidden.

 

Take “unboxing” videos, the latest rage on YouTube. They’re so popular that a 7-year-old boy made $22 million last year from opening and reviewing new toys with the help of his parents.

Now imagine that concept applied to the fight to end poverty. Millions of people live in countries rich in natural resources like oil and gas. “Unboxing” the financial details inside secret deals made by their governments and multinational companies to tap this wealth is an idea that has gained more and more traction.

So what would it mean if that black box of secrecy was ripped wide open?

 

The Big Reveal 

This week, that could very well happen. 

The board of the Extractive Industries Transparency Initiative (EITI) is meeting in Kyiv, Ukraine. The EITI, implemented within 51 countries, promotes the open and accountable management of oil, gas, and mineral resources. 

It’s a crucial moment for companies, governments, and civil society to assert the disclosure of oil, gas, and mining contracts as the global norm. Without it, much financial information in these deals remains hidden—a recipe for corruption and the squandering of valuable revenues that could be (but often aren’t) used to fight poverty.

 

Contract disclosure helps answer key questions: 

  • What kind of deal did the government strike?
  • How are the billions of dollars in revenues shared?
  • When will the money arrive?
  • Were there any unnecessary tax breaks?
  • And how are disputes with companies handled?

 

Last year, Oxfam published our first-ever assessment of corporate policies related to contract disclosure. The majority of EITI corporate board members, along with 18 of 40 companies surveyed, made statements in support of disclosure. This progress, plus the fact that more than 2,000 contracts and related documents from oil, gas, and mining projects in more than 90 countries are publicly available, illustrate a growing consensus that people deserve to know the substance of these deals. 

But don’t just take our word for it. The International Monetary Fund—an important player in oil and mineral-rich countries when they need a bail out—just published an update of its Fiscal Transparency Code that includes natural resource revenues. Disclosure of payments for each oil, gas, and mining project as well as contract disclosure “are now established as international norms,” says the IMF. 

A decade ago activists were told “this is impossible and will never happen.” Now, none other than the IMF is giving its seal of approval: “Governments should publish or disclose project-specific contracts, licenses and agreements… In general, there should be no legal impediments to publication of resource contracts.” The IMF uses the code to evaluate its member countries, and for one-third of them around the world, oil, gas, and mining revenues are important sources of government finance.

 

Why Contract Disclosure Matters

 

Contract disclosure has many benefits, including: 

  • Following the money– It’s hard to debate how oil money should be used if you don’t know where it comes from. Contract disclosure is an important link in tracking the money from how it’s generated to how it’s spent. Governments and citizens shouldn’t take disclosed payments at face value without knowing the underlying terms. Disclosure also helps citizens, journalists, and others play accountability and oversight roles. (Contracts can also determine how and when governments can audit companies—the subject of Oxfam’s Examining the Crude Details report—to make sure companies aren’t underpaying governments.)

 

  • Deterring corruption– As Isabel Munilla, co-author of our Contract Disclosure assessment, wrote, “the prospect of public scrutiny can help deter select government officials from the corrupt use of their power in contract negotiations, thereby helping to secure a better overall deal in the public interest.” The IMF agrees and says publication will strengthen the hand of government negotiators.

 

  • Supporting gender justice in extractive projects– Many of these operations are not gender neutral, as women disproportionately bear their costs in terms of “social and family disruption, health and safety risks and environmental degradation.” Contract disclosure can facilitate broader efforts to protect women’s rights and gender justice.

 

  • Supporting company engagement with communities– Disclosure can dispel suspicion and foster better engagement with people affected by extractive projects, forming a key part of the information needed to obtain free, prior and informed consent from these communities. Disclosure can also help companies avoid the risk of future scandals when the contracts come out.

 

A New Chapter 

After more than a decade of work by Oxfam and our allies in the Publish What You Pay campaign, the era of secret deals is coming to an end. 

According to the Natural Resource Governance Institute, 31 of 51 countries in the EITI have disclosed at least some of their agreements. And more and more countries are making contract disclosure a legal requirement, including Ghana–where all oil and gas contracts are in the public domain. 

Action is needed by the EITI board this week to explicitly require contract disclosure by member governments. By doing so, the EITI will help maintain its relevance as a transparency initiative, send the right signal to countries hoping to join, and endorse this new global norm. That’s the kind of big reveal Oxfam wants to see.

 

*Ian Gary directs Oxfam America’s policy, advocacy and program work focused on promoting transparent and accountable financial flows – for example from taxes, foreign aid or oil and mining revenues – to fight poverty and reduce inequality. Previously he was Senior Policy Manager – Extractive Industries, at Oxfam America.


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