By Aaron Sayne, Alexandra Gillies, Andrew Watkins, Natural Resource Governance Institute
This post originally appeared on resourcegovernance.org on April 6, 2017
Oversight actors can detect and prevent corruption in the oil, gas and mining sectors if they ask the right questions. Corruption schemes can be complex and opaque, yet clear patterns and similar signs of problematic behavior do exist across resource-rich countries.
To find these, we examined over 100 real-world cases of license or contract awards in the oil, gas and mining sectors in which accusations of corruption arose. The cases come from 49 resource-producing countries.
Based on this work, we developed a list of 12 red flags of corruption in extractive sector license and contract awards, with real-world illustrations for each. This list can provide a concrete, practical tool for many types of actors, not least:
Download the full report on resourcegovernance.org
By Rob Pitman, Natural Resource Governance Institute
This post originally appeared on resourcegovernance.org on March 2, 2017
It has been notoriously difficult for citizens in resource-rich countries to lay hands on extractive industry contracts and licenses between their governments and private sector extractive companies. But that seems to be changing.
For a new report, Past the Tipping Point?, Don Hubert and I reviewed contract disclosure practice and policy in more than 50 countries and we were intrigued to find that 29 governments—well over half—were disclosing at least some of their extractives contract or licenses. An additional 10 governments that were outside the scope of our review are also disclosing, raising the global figure to an impressive 39 countries. These disclosures include contracts with dozens of oil and mining companies. Further details for each country including links and references to key documents can be found in this table.
The number of countries that have passed laws requiring contract disclosure has also increased. We tallied 22 countries that have a law or policy that requires some form of contract disclosure for either the petroleum or mineral sectors. When we plot the dates that these policies were passed, the trend is striking. Since 2008 the number of countries with laws has more than tripled.
That so many countries are disclosing contracts and making it a legal requirement to do so marks an important shift in the debate over contract disclosure. Industry actors pushing against contract disclosure are being overtaken by this new reality. The fact that so many governments and companies are choosing to disclose demonstrates that the benefits of disclosing contracts and licenses outweigh confidentiality concerns commonly cited.
For those wanting to browse or search contracts, online repositories including resourcecontracts.org and Open Oil’s repository have enabled easy access to over 1,400 contracts, released through official government disclosures, but also by company disclosures through stock exchange filings and financing requirements. These documents cover over 85 countries.
Past the Tipping Point? focuses on the role that the Extractive Industries Transparency Initiative (EITI)—a global standard to promote the open and accountable management of oil gas and mineral resources—has played in making this change happen. Since 2013, the EITI Standard has included a provision on contracts that encourages public disclosure of contracts (section 2.4). In the period since that change, nine new EITI countries have released contracts, and nine have enacted laws that require contract disclosure.
Yet, there is still plenty of room for improvement. We note that among the countries we reviewed there are still 20 that have neither published contracts or licenses nor passed a contract disclosure law. A further 11 countries are failing to make the disclosures required under their national laws. Even in countries where contract disclosure is an established practice, it remains challenging for citizens to know which contracts or licenses are active because very few governments keep public lists of active projects and the agreements associated with them.
In this changing landscape, we hope that our findings and recommendations help civil society, companies and governments find ways to improve the quality and accessibility of licenses and contracts that are already in the public domain. We also hope that these findings and recommendations motivate reformers in non-disclosing countries to push for the publication of the licenses and contracts that are currently secret.
The contract disclosure movement
Beyond EITI, several other contributors have helped make this change possible. Important early work was carried out by Amnesty International, which highlighted the importance of transparency in combatting corruption risks related to the Chad-Cameroon and Baku-Tbilisi-Ceyhan pipelines. In 2009, the NRGI study Contracts Confidential analyzed and challenged the legal foundation for contract secrecy.
In 2012, a range of local civil society groups actively pressed EITI to speak about contract disclosure including Association Africaine de Défense des Droits de l'Homme in the Democratic Republic of Congo; Center for Economic and Political Research in Azerbaijan; Grupo Propuesta Ciudadana in Peru; Luta Hamutuk Institute in Timor-Leste; ROTAB PCQVP in Niger; and Wacam in Ghana. Today, a wide range of global organizations including the Colombia Center on Sustainable Investment, Global Witness, Open Contracting Partnership, Open Oil, Oxfam America and mining industry group the International Council on Minerals and Metals all contribute to ongoing discussions on the issue.
International organizations also deserve some credit. Way back in 2007, the IMF called for the disclosure of extractives contracts in its Guide on Resource Revenue Transparency. In 2010, following four years of extensive multi-stakeholder consultations, the U.N. special representative for business and human rights, John Ruggie, included disclosure among core “Principles for Responsible Contracts.” And in 2011, the International Bar Association released a model mining development agreement that included a provision noting that contracts produced using the model should become public documents.
International financial institutions have also taken note. In 2012, the International Finance Corporation (IFC)—the World Bank Group’s private sector lending arm – added a financing requirement that IFC-backed oil, gas and mining projects disclose the “principal contract with government that sets out the key terms and conditions under which a resource will be exploited.” The European Bank for Reconstruction and Development established similar requirements for hydrocarbon projects in 2013.
Rob Pitman is a governance officer with the Natural Resource Governance Institute (NRGI).
For more on contracts see the NRGI report "Twelve Red Flags: Corruption Risks in the Award of Extractive Sector Licenses and Contracts
Tomorrow has arrived. Canadian-listed mining, oil and gas companies operate in more than 100 countries around the world – including some of Africa’s poorest countries. After years of calling on the Canadian government to require companies like these to disclose payments to foreign governments, ONE members and ONE partner organizations like Publish What You Pay Canada finally have what they have been asking for: data.
Thanks to a Canadian law that came into force in 2015, these companies are now required to report – for the first time ever – their contributions to governments. Data like this can empower citizens in some of the poorest countries to hold their governments accountable for how that money gets used and to help identify and curb corruption.
Payments to Libya, Zambia, Senegal & Nigeria
The data released so far shows large payments made to at least 18 African governments. Here are a few examples:
First Quantum Minerals, a Canadian metal mining company, reports that it paid $293 million to the Zambian government in 2016, an amount roughly equivalent to one-fifth of Zambia’s 2017 education budget. These payments were mostly royalties and taxes for the Kansanshi project, the largest copper mine in Africa.
In 2016, First Quantum Minerals’ Kansanshi project, the largest copper mine in Africa, generated $293 million, mostly in royalties and taxes, for the Zambian government. This amount is amount roughly equivalent to one-fifth of Zambia’s 2017 education budget.
Suncor Energy, a large Canadian energy company, paid $29 million in taxes and royalties to Libya’s National Oil Corporation in 2016 for the exploration of oil fields in Libya. $29 million is a sizeable sum for a country struggling to recover from a civil war and address an ongoing ISIS insurgency.
Teranga Gold Corporation is the Canadian gold mining company that owns and operates the only large-scale gold mine in Senegal. It reports that it paid $71 million to the Senegalese government in 2016, which is equal to nearly a fifth of the budget for Senegal’s Ministry of Health.
Canada’s Teranga Gold Corporation owns and operates the only large-scale gold mine in Senegal. Its 2016 payment to the Senegalese government is equal to nearly a fifth of the budget for Senegal’s Ministry of Health.
CNOOC Limited, the Chinese state-owned oil company, owners of the Canadian oil and gas company Nexen, paid $109 million in 2016 to the government of Nigeria. $109 million is almost half of Nigeria’s 2017 capital budget for the Federal Ministry of Education.
Follow the money
Data like this gives valuable clues to citizens of recipient countries and can help them to follow the money. For instance, the First Quantum Minerals data shows that the company paid $376,000 to benefit national parks, wildlife and schools in Zambia. Someone in Zambia can now dig deeper: Which national park agencies, wildlife groups and schools? What has the money been used for? Locals can hold decision makers to account for how the money was actually spent by getting answers to questions like these. The data also highlights the value of detailed, project-level payment information, which provides citizens with highly useful data for tracking revenue streams.
But this is just the beginning! If every country in the world followed Canada’s lead and required companies to publish this data, citizens would have a complete picture of how their country’s natural resources were being sold. Citizens of Zambia could demand that money from their country’s copper goes towards things like education, health, infrastructure and ending poverty, so that all citizens benefit from their country’s natural resource wealth. At ONE, we’re working with partners around the world to make that a reality.
By making this data public, the Canadian government has taken a critically important leadership role to help enable people to hold their governments to account. But the Canadian government could make the data easier to use by requiring companies to publish the information as “open data”. In data-speak, that means in an open, machine-readable format; for example, as a CSV file that can be opened in Excel instead of a PDF. Some governments like the U.K. already require that data be provided in machine-readable formats. Although PDF is a more common format, open data formats like CSV would allow people to more easily analyze and identify the payments that flowed to their government.
Luckily, a number of companies (i.e. Potash Corporation and Mosaic) have already gone above and beyond by voluntarily publishing their data in an open data format, demonstrating that doing so isn’t a heavy lift for companies.
Transparency is the backbone of a just and well-governed society. The disclosure of new data on payments to governments in the mining, oil and gas sectors will provide citizens with previously unthinkable opportunities to ask their governments important questions about how these payments get used.
You can explore the data at the Canadian Extractive Sector Transparency Measures Act website. All figures are converted to Canadian Dollars.
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