Uhuru Blog is pleased to bring you a special guest post by Zara Rahman, a research associate at OpenOil, an energy consultancy and publishing house based in Berlin founded on the values that creative, practical and socially progressive policy making in the oil and gas industry is vital to our collective future. They have published a freely available book compiled together with leading oil experts and professional, available here. As Tanzania emerges as an important future source of oil and gas, understanding contracts signed with the government becomes increasingly crucial.
Oil contracts – why so important?
By Zara Rahman
The problem
Think of the oil industry, and you think of secrecy,
corruption, spills and environmental problems. But transparency, even in this
secretive industry, is increasing. Hard to believe perhaps given the industry's
poor record in this area, but the tide is turning, and more and more data is
being put online. There are many initiatives doing great work on making
machine-readable data accessible and allowing people to really understand it,
but until now, there has been one data stream which has remained incredibly
elitist.
Oil contracts. There is an emerging norm of governments
publishing, or putting online, the contracts that they sign with international
oil companies, and this is a great success for the transparency movement
globally. No longer will there be secretive, closed door negotiating sessions
which leave citizens (and even many in the government) wondering what exactly
was agreed to, how much money their government is getting, what the oil company
should or should not be doing, and whether or not they got a 'good deal'. There
are now 7 jurisdictions around the world who publish their oil contracts, and
there are more to come, with transparency of oil contracts being written into
constitutions and emerging as a best practice globally.
Publishing the contracts is the first step towards allowing
citizens to know what is happening, but there is one key problem. An oil
contract is typically over 100 pages long and written in complicated legal
jargon. It is not the kind of document that someone without a law degree, or
years of specialisation in the topic, can pick up and really understand.
Tools to help people understand these contracts have, until
now, been overwhelmingly aimed at industry employees or those with elite levels
of education– private courses costing £2,000 per person for two days, held in
London or Abu Dhabi, or expensive law text books aimed at the postgraduate law
student. Clearly, neither of these is going to help a civil society activist in
the Niger Delta make sense of the contracts governing their oil industry.
The solution – bringing open thinking to the oil industry
At the beginning of November 2012, OpenOil convened a group
of 10 world-renowned experts to come together for a week and collaboratively
write a book on how to read and understand oil contracts, in what is known as a
'booksprint.' The method was developed in the open source technology world, and
has been developed by Adam Hyde of
http://booksprints.net
and involves no pre-production, and very little post-production.
To many, the idea of writing a book on a topic as complex
and involved as oil contracts seemed crazy, especially considering the fact
that no preparation was done beforehand; no planning chapter titles, or
organising who was going to write what. All work began at 9am on the Monday,
and involved having a lot of faith in the facilitator of the method, who has
now used the booksprint method to produce over 50 books.
How does a guidebook help?
The terms decided in contracts can have long reaching
effects, and be valid for anything up to 20 or even 30 years. The environmental
standards that companies have to abide by, clauses relating to the affect of
the project upon the local economy, and most importantly for many, the amount
of money that the government is going to get, are all decided upon in the
contract.
Unfortunately however, there is no one fixed number that we
can read and then know for sure how much money the government is getting. Profit
or production splits are complicated calculations, typically outlined in a
number of different clauses (and there are many more variants depending upon
the type of contract used). This means that in order to have a real
understanding of governance of the industry in a particular country, it is
essential to have a real handle on all of the issues outlined in the contract.
The book runs through all of the salient issues addressed in
contracts, and uses actual excerpts from contracts around the world to compare
ways of dealing with certain issues. 8 different public domain contracts are
referred to and quoted extensively throughout. Half of the 'family' of
contracts are actual signed contracts, and half are 'model' contracts, which
have been released by their respective governments. Contract excerpts, though a
little intimidating to begin with, are explained in detail to allow the reader
to get a handle on the language used in the contracts, so that after reading
they can pick up a contract and, firstly, feel some sense of familiarity in the
contract terms used, as well as know where to look to answer their particular
question.
What now?
OpenOil are now looking for partners to work with on
evolution of the book, and already there has been strong interest in
translating the book into various languages to increase its accessibility
across the world. A training curriculum will be developed out of the book, and
training courses – the low cost equivalent to the expensive courses mentioned
above – will be organised for civil society, parliamentarians, media, and
interested members of the parliament.
These courses will take place in locations where these
issues really matter – Kampala, Nairobi, Dar-es-Salaam, to name just a few. For
now though, the book has been downloaded hundreds of times and, it is hoped, is already a crucial tool to those
wanting to know how to understand their oil industry.
