Transparency of Oil and Gas Contracts in Tanzania

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Background

Transparency can help improve the quality of government contracting. It lowers barriers to entry for firms to bid and provide those bidders with greater assurance that the process will be fair. Governments benefit from increased competition and learn from similar contract models from other jurisdictions. Civil society can also use contract information to ensure that the delivery of services or the supply of revenue is in accordance with the agreement. [1]

Tanzania’s Perspective

In November 2008, the Tanzania government took a significant step toward enhancing transparency by deciding to join the Extractive Industries Transparency Initiative (EITI). [2] There are concerns that the country’s inexperience in the gas sector has allowed investors to secure overly generous contract terms. [3] As a result, civil society groups are pressing for open contracts in the extractive industry as a means of heightening government accountability over natural resource wealth and to promote more public discussions over how revenues are invested. [4]

Transparency of contracts is fundamental in ensuring proper management of natural resources. As “Without transparency, no accountability,” the intention is to make all the contracts known to the people and not just the Parliament. After all, gas wealth belongs to the people of Tanzania and the people have the right to know the contents of the contracts entered into by the government on their behalf. [5]

In 2014, a leaked contract between Norway’s Statoil and the Tanzania Petroleum Development Corporation (TPDC) covering an agreement to share natural gas production suggests that more generous terms were given to the company than had been signalled by the “model agreements” previously made public. The leak created considerable public discussion and outcry in the country despite outside experts cautioning that the deal may not be out of line with international precedents. Because most of those precedent agreements remain confidential, it is difficult for the Tanzanian civil society to evaluate and validate that claim. [6] [7]

The Natural Resource Governance Institute (NRGI) endorsed recommendations from the Civil Society Extractive Industry Working Group’s regarding the importance of transparency and accountability as a major objective of the petroleum policy, as well as the need for a formal consultative process of all stakeholders involved to cultivate a critical mass of understanding and support from Tanzanian citizens. [8] [9] [10]

Tanzania's case illustrates that even contracts negotiated with probity and efficiency can appear suspect if they are kept secret. In this regard, experts suggest that Tanzania’s Production Sharing Agreements (PSAs) may not be out of line with similar deals from the rest of the world. But without access to the actual agreement, and because most of those agreements still remain confidential, it is difficult for the civil society, media or public to evaluate that claim. [11] Tanzania has not been publishing its natural resources’ contracts it entered with foreign companies. In fact, the Parliamentary Accounts Committee (PAC) was denied access to the contracts by the Ministry of Energy and Minerals. [12] [13]

Legislative and Freedom of Information

Despite these developments, contracts signed in the extractive industries so far remain top secret. As a matter of fact, even the Freedom of Information Bill being drafted by the Parliament does not address this gap and may even reinforce the criminal nature of public disclosure of contracts. [14]

Currently, Tanzania does not have a freedom of information law, which would represent a key step toward meaningful transparency and accountability in the extractive industry. Not surprisingly, the civil society’s advocacy for the right to information has been heavy. Also, legislative oversight is playing a growing role in Tanzanian governance; debate within Tanzania’s Parliament has by all accounts increased lately, and in the meantime the Tanzania government has undertaken a review of mining contracts. [15]

Proactively, the release of government contracts is now being adopted by a growing number of countries around the world and will undoubtedly improve the quality of contracting and promote trust in government. Therefore, the draft Freedom of Information Bill being prepared by government should mandate this proactive publication. [16]

Countries endowed with natural resources could be prosperous if they practised good governance, transparency in their dealings with mining, oil and gas companies, stronger disclosure, anti-corruption rules and economic policies that promote diversified economies to discourage dependence on resource rents. Under this setup, transnational companies could be compelled to play a more important role too by enforcing and strengthening the existing transparency rules. [17]

Taking the step from transparency to actual accountability requires a civil society with the skills and training for effective monitoring. In this regard, bilateral donors, the multilateral banks and the private sector should support programmes to educate citizens in auditing, accounting and tracking of revenues and expenditures. If citizens do not have these analytical and technical skills, then they are unlikely to hold public officials accountable for spending resource revenues badly or mismanaging them. [18]

References

  1. Government Contracts Tanzania”, “Al Jazeera”, retrieved on 27th December 2014.
  2. Tanzania Transparency Snapshot”, “Natural Resource Governance Institute”, retrieved on 27th December 2014.
  3. Tanzania energy officials arrested in gas contract fight”, “Petroglobalnews”, retrieved on 27th December 2014.
  4. Tanzanian CSOs have released a statement”, “GOXI”, retrieved on 27th December 2014.
  5. Tanzanian officials arrested for failure to publish details of natural gas contract with Statoil, BG Group and ExxonMobil”, “Global Research”, retrieved on 27th December 2014.
  6. Publishing Government Contracts addressing Concerns and easing Implementation”, “Centre for Global Development”, retrieved on 27th December 2014.
  7. Tanzanian officials arrested for failure to publish details of natural gas contract with Statoil, BG Group and ExxonMobil”, “Global Research”, retrieved on 27th December 2014.
  8. Tanzania Gas Contract Appears Reasonable, Though Questions Remain – Natural Resource Group Says”, “All Africa”, retrieved on 27th December 2014.
  9. NRGI supports CSO Extractive Industries Working Group position”, “GOXI”, retrieved on 27th December 2014.
  10. What leaked gas agreement means”, “The Citizen”, retrieved on 27th December 2014.
  11. Government Contracts Tanzania”, “Al Jazeera”, retrieved on 27th December 2014.
  12. Give us a break- Muhongo”, “The Citizen”, retrieved on 27th December 2014.
  13. Scandal in Tanzania: A little context and 3 lessons”, “Oxfam”, retrieved on 27th December 2014.
  14. Tanzania Transparency Snapshot”, “Natural Resource Governance Institute”, retrieved on 27th December 2014.
  15. Tanzania Transparency Snapshot”, “Natural Resource Governance Institute”, retrieved on 27th December 2014.
  16. Government Contracts Tanzania”, “Al Jazeera”, retrieved on 27th December 2014.
  17. Beating the Resource Curse in Africa: A Global Effort”, “Council on Foreign Relations”, retrieved on 27th December 2014.
  18. Beating the Resource Curse in Africa: A Global Effort”, “Council on Foreign Relations”, retrieved on 27th December 2014.