Making a Case for Contract Transparency in Ghana

“Any information or material supplied by the Company to the Government pursuant to the provisions of this Agreement shall be treated by the Government, its officers and agents as confidential and shall not be revealed to third parties, except with the consent of the Company (which consent shall not be unreasonably withheld), for a period of 12 months, with respect to technical information, or 36 months, with respect to financial information, from the date of submission of such information. The Government and persons authorized by the Government may nevertheless use any such information received from the Company for the purposes of preparing and publishing general reports on minerals in Ghana”- Confidentiality Clause of Ghana’s Mineral Sector, 2004 (Credit: Contracts Confidential: Ending Secret Deals in the Extractive Industries)

The mounting calls for openness in oil production agreements are not only justifiable by law but also recipe for prudent oil revenue management and sound practices in the extractive industries. It is the single most legitimate arguments for people and organizations to demand legal specificity to the activities that affect their livelihoods. And it is important to know that the precise detail and legal provisions that reveal obligations of a state and a company or consortium of companies are enshrined in contracts. In the context of contract transparency, the Extractive Industries Transparency Initiative is widely argued to be inadequate tool to ensure full transparency in the extractive sector. This explains how delicate initiatives bordering on contract disclosure are. Nonetheless, the move for contract transparency is striking for resource-rich developing economy like that of Ghana.

There is no doubt that Ghana expects to gain enormous revenues from the nascent oil and gas industry as commercial production is scheduled to commence in the last quarter of this year. Nonetheless, the polemics of the resource curse continue to assume new effects in resource-rich countries. And believe it or not, Ghana is in no way exempted from this force of destruction. Already, the gold mining industry provides the closest experience of this unfortunate paradox of plenty.

In my earlier article “Secrecy in the Model of Transparency in Ghana’s Extractive Industry”, the arguments for contract transparency were raised. The article again sought to describe how urgent it is for Ghana to break needless secrecies in agreements in the extractive industry. This article in particular seeks to raise concerns about the importance of contract openness based on the statements made by Brian Glover, General Manager for Tullow Uganda. In essence, it goes without saying that Ghana should not aspire to avoid the resource curse if contracts in the extractive industry are held in secrecy.

The General Manager of Tullow Oil in Uganda, Brian Glover has said that the deal between Tullow, the oil company operating in the Alberta region and the government is worth publication because it is government that took the biggest share. He said that government of Uganda would be getting US$2 billion in revenue once production kicks off next year.

The question that should be asked is that is Tullow’s readiness to expose agreements premised on the fact that the government of Uganda is getting the largest share? What then is the case in Ghana? Can Tullow and other jubilee partners raise this important concern in Ghana?

Contract Transparency and Contract Secrecy

It is widely accepted that contract transparency more often than not provides adequate antidote to increased corruption, civil wars as a result of confusion and non-democratic tendencies. Apart from the fact that contract transparency supports and encourages practices aligned with democracy, it empowers the local people to demand the best from their leaders. People are better positioned to track the movement of their resources and ascertain how their revenues are being used. Given this premise, contract transparency provides an outstanding tool for a responsible management of natural resources through informed citizens. Again, the increased secrecy in the extractive industries is responsible for the unnecessary contract renegotiations that bring tensions in a country’s investment climate. This explains that bad deals are commonplace in contracts.

Contract disclosure forms an important component of the Extractive Industries Transparency Initiative of which Ghana is very much committed in its implementation in the emerging oil and gas sector. The activism surrounding the disclosure of contracts has gained a prominent form and it behoves on government of Ghana to remain committed to this strategy. Significantly contract disclosure provides grounds for a level playing field between companies and governments.

In Chad, during the construction of the Chad-Cameroon pipeline, myriad local and international advocacy groups rose to demand unprecedented revenue transparency and restrictions on expenditures enshrined in contracts. Even with the mounting calls for the pipeline contract transparency as spearheaded by the World Bank, the upstream exploration and exploitation agreement was not disclosed. This underscores the importance and the urgency of contract transparency in the extractive industries.

Tullow Oil and other Companies in Jubilee Field

The International Finance Corporation (IFC) has set the standard for the importance of policy disclosure in its investment strategies with the Performance Standards on Social and Environmental Sustainability, and the Policy on Disclosure of Information.

Whether or not the oil companies operating in the Jubilee field are prepared to disclose petroleum agreements is a different issue altogether. Brian Glover’s comment really leaves much to be desired. It is known that confidentiality clauses enshrined in contracts are used to cover broad range of information that ideally should be available to people affected by business operations. Certain contracts cite specific examples of confidential information as well as declaring that all information is confidential.

In the case of Uganda, Tullow are prepared to disclose agreements because the government gets maximum share of revenue. There are opposite cases where companies also resist governments attempt to disclose petroleum agreements. Can it be said that oil companies resist disclosure of contracts because they (companies) get the highest share? In 2006, Tenke Fungurume Mining (TFM) which is controlled by Freeport McMoran in the United States, actively resisted and pressured the government of the Democratic Republic of Congo not to release its contract. This was prior to the determination of the government to publish all mining contracts. Interesting when the contracts were published by the government, the exploitation agreement for TFM was the only noticeable absence (Contracts Confidential: Ending Secret Deals in the Extractive Industries by Peter Rosenblum and Susan Maples).

What do these juxtapositions inform us? The argument I am trying to raise is that the responsibility of disclosing contracts to public domain is a mutual responsibility of the parties involved. That is, the companies and the governments. It is described as a breach of confidentiality clauses when one party publish contract without the consent of the other. However, it is possible for one party to disclose contracts. It is simply unthinkable for agreements signed on behalf of the people to be made secret. In fact, public access to contract terms would make it possible to establish intelligent policies for the benefit of current and future generations. Public access to contract terms helps identify the true face of false politicians who do pursue improper interests. Thus, if there is nothing dishonest going on, then why attach secrecy to contract terms.

It is an advice to the government of Ghana that its preparedness to disclose contracts with companies in the extractive industries should be made realistic. In making our democracy more formidable, it is a step in the right direction for the country to make contracts public. This would, without any doubt, bring good deals to the optimum benefits of the country. The companies operating in the Jubilee field including Tullow Oil, Kosmos Energy, Anadarko, Sabre Oil, EO Group and GNPC should be prepared to make contracts public if really they stand to be transparent and efficient in their corporate strategies. Ghanaians reserve the right to know how their resources are being shared and used to their benefits.

It is, nonetheless, a significant move that President John Evans Atta Mills has announced, according to Oxfam America, that all current and future agreements with companies to develop the nation's oil and gas resources will be made public. It is striking that the mining sector be included to reverse the paradox of plenty.

The claim for confidentiality which protects “commercially sensitive information” of companies and possibly governments is an affront to democratic accountability. Ghana cannot boast to be the upholder of democracy when still contracts with companies in the extractive industry are treated sacred and too special to be disclosed. Contract transparency is critical to addressing better resource management and prudent revenue investments. The driving of secrecy by government only breeds suspicion and needless conflicts. In generic sense, it is known that transparency in the extractive industries makes it possible to track resource development and the use of resource revenues. This will clamp down on the ravages of corruption and its attended consequences.

The burning question is that if Tullow Oil is prepared to disclose contract, what should we expect from the government of Ghana? And if the government is prepared to disclose contracts what will be the reaction of Tullow, Kosmos and other oil companies.

Conclusion

There is ample time for Ghana to make amends and start right with the production of hydrocarbons. Definitely, Ghana’s EITI implementation would be limited if contract transparency is not given the utmost priority. Issues with environmental mitigation costs, revenue and cash flow data (and other specificities) that are part of commercially sensitive information are also vital to be known for better mineral revenue management. The government, companies in the extractive industries, and civil society organizations should rigorously engage in making contracts disclosure possible in Ghana. In the international front, the IFC with its Performance Standards in the Sustainability Policy should set out the best strategy in financing private sector investments. The government should show keen interest in transparency initiatives especially for contracts and as such demonstrate convincing readiness to embrace laid-down international standards.

The author, Stephen Yeboah is the National Co-ordinator for Osagyefo Network for Rural Development, an NGO based in Kumasi [email: stephenyeboah110@yahoo.com]