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 the fiscal 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 15th 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.
- Interfaith Standing Committee on Economic Justice and the Integrity of Creation
- Policy Forum
- Oil and Natural Gas Environment Alliance (ONGEA)