Lessons from Chad & ExxonMobil reveal… New laws cannot beat “oil curse” if general governance is weak—Int’l Expert

Jul 04, 2018 ExxonMobil, News

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By Kiana Wilburg

There are many nations that hold an abundance of lessons on what not to do in the oil industry.
Chad is just one of them.
In an exclusive interview with Kaieteur News, Director of Power and Money at Oxfam America, Ian Gary shared a few of these that Guyana would find useful. It is an area Gary has written on extensively.

The Oxfam Director noted that Chad like Guyana, had signed a contract with American oil giant, ExxonMobil which was considered by some observers to be generous towards the company. But there were many mistakes that followed.
In this regard, Gary said, “In Chad, oil exploration, development and production proceeded much more quickly than the development of new laws and institutions to manage oil and the associated revenues.”
He noted that capacity building programmes from donors such as the World Bank were slow in delivery and the government made it difficult by frequently changing ministers and key staff in government agencies.
The international oil and gas expert said that the “two-speed” nature of Chad’s oil project meant that ExxonMobil and its partners moved much more quickly than the Chadian government and society could handle.
He added, “A lot of hopes were placed on Chad to defeat the ‘oil curse’ or ‘resource curse’ because of an innovative law which required the government to spend oil revenues on certain priority areas – such as health and education – and to set up a citizen oversight committee to manage investments. The law also earmarked five percent of oil revenues to local communities close to the oil fields.”
Gary stressed however that these hopes were dashed when the government changed the law and allowed money to be used on military expenditures. He said that a lesson here is that a new law will not beat the “oil curse” when general governance and rule of law in the country are weak.
GUYANA’S PREPAREDNESS
On a weekly basis, the government continues to face scathing criticisms for its lack of preparedness for the oil and gas sector. In fact, the needed legislation and policies for the sector are still to be finalized.
The completion of the Local Content Policy for example, is now up to Business Minister, Dominic Gaskin. This crucial document will provide guidance on the employment of locals as well as the use of goods and services provided by indigenous companies.
That said, Guyana’s draft Local Content Policy has been criticized in recent months for lacking provisions, which would safeguard against exploitation by companies. The draft is still receiving “finishing touches” according to Natural Resources Minister, Raphael Trotman.
The draft however speaks nothing of how to avoid procurement fraud, conflict of interest and favouritism, among other crucial areas.
Instead, the Local Content Policy framework seeks to address, the suite of opportunities that may arise and the approaches to be taken in selecting and developing opportunities related to enhancing the capabilities of Guyanese nationals and businesses.
It also describes what will be done to ensure that the activities in the petroleum sector are conducted in a manner that transparently secures the maximum benefit for the people of Guyana, while recognizing the limitations of the country; and holding all actors accountable to the present and future generations of Guyanese who are the owners of the nation’s petroleum resources.
SOVEREIGN WEALTH FUND
The draft legislation which will pave the way for the establishment for the Sovereign Wealth Fund (SWF) is also receiving finishing touches.
Finance Minister, Winston Jordan, has announced, however, that the draft document will be the subject of several rounds of consultations before it gets to Parliament by year end.
In the interim, the International Monetary Fund (IMF) has already provided advice to the government on the different areas in which it should improve on in the draft document. One of the areas it commented on in this regard speaks to the need for clearer reporting requirements when the SWF is used by officials.
PETROLEUM COMMISSION
The Petroleum Commission is still stuck in a sub-committee of the National Assembly. It has been the subject of much consultation and criticized heavily for its many flaws.
One of the most disturbing concerns regarding the Bill pertains to the uncapped authority given to the Natural Resources Minister.
Not only will the Minister have the power to select the members of the Petroleum Commission but he can also select and appoint the members of the Board along with its secretary. In fact, the Minister can even disrupt the work of the Commission as he pleases.
Minister of Natural Resources, Raphael Trotman, has already indicated that he intends to have such powers in the Bill diluted.

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