Africa’s new energy giants may have transparency on their side, by Thalia Griffiths at African Energy
Among the extractive industry stakeholders who gathered in the Sussex countryside last month to discuss transparency were representatives of some of the world’s leading oil companies. Under fire on several fronts, they were there to do their bit for the Extractive Industries Transparency Initiative (EITI), whose board spent Valentine’s Day in the rural splendour of Wiston House.
EITI, itself once memorably described by a transparency campaigner as “a compromise between what we wanted and what ExxonMobil would let us have”, is far from perfect, but its efforts to make companies and countries disclose how much they pay and how much they earn from their oil and mining industries have created a global momentum.
Amusingly, many of those same companies have been busy lobbying in Washington against a clause in the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring oil, gas and mining companies to disclose their tax and other payments to governments around the world.
Senate lobbying disclosure forms show that leading oil companies like Chevron, ExxonMobil, Royal Dutch Shell, ConocoPhillips, Marathon and Occidental have been lobbying against the provision. Ironically, the same companies have formally expressed their support for the EITI.
Where EITI is voluntary, the US provisions would be compulsory for companies with a US share listing, and the idea has been picked up in Europe too. The European Commission introduced a similar legislative proposal to Dodd-Frank in October 2011. A final law is expected later this year, and oil companies are also lobbying in Brussels to weaken the proposed legislation.
Coupled with recent anti-corruption legislation in the US and UK, this is making it harder for companies to pay bribes or ally with unsavoury partners. Even in Angola, a state whose oil wealth has traditionally protected it from having to do what the international community says, the latest licensing round for blocks in the Kwanza Basin saw none of the awards to obscure Angolan minority interests that have characterised previous licensings.
And one US company with activities in Angola, Cobalt International Energy, is the subject of a US investigation, following suggestions that one of its minority partners, an Angolan company named Nazaki Oil and Gas, is linked to senior government officials. The Foreign Corrupt Practises Act prohibits the payment or offer of payment to foreign officials in order to win business, and US authorities have recently brought a number of high-profile prosecutions against energy groups operating in Africa under the Act.
This kind of oversight is particularly important as several states in East Africa are about to become major oil and gas producers. Tanzania and Mozambique have discovered huge offshore gas reserves ideally located for export to the energy-hungry Asian market, while Uganda is close to beginning oil production. Mozambique’s gas volumes will be comfortably enough for domestic power generation and for new industries as well as for export, with more exploration still to be done. Eni chief executive Paolo Scaroni has said the company will invest $50 billion in its planned development, talking of a new town to serve the gas plant, and the creation of 40,000 jobs.
Tanzania, which already has smaller scale gas production, has not yet found the same volumes as its southern neighbour, but BG Group and Statoil have announced a series of offshore discoveries that could supply an export plant, and the bidding war that has broken out for Cove Energy, a small company with stakes in Tanzania and Mozambique, provides an early indication of what’s at stake. Shell, Thailand’s state-owned PTT, and two Indian state companies are so far considering bids of around £1 billion for Cove, which identified the region’s potential early on, but lacks the cash and expertise for the development phase.
East Africa’s new energy powers have the chance to learn from the mistakes of other states and emulate good practice, as well as now having the opportunity to deal with international oil companies whose activities are under increasingly close scrutiny in their home jurisdictions. Nigeria’s first gas export plant, on Bonny Island, has been a fertile source of FCPA convictions against companies involved in paying bribes to secure over $6 billion of contracts. Hopefully it won’t happen again.
Thalia Griffiths is editor of African Energy www.africa-energy.com