“Good” oil companies, “bad” oil companies

Tullow Oil has recently completed a controversial $2.9 billion sale of parts of its Ugandan oil stakes. Tullow’s deal with Total (France) and CNOOC (China), which had been mired in disputes with the Ugandan government for more than a year, was finalized despite a parliamentary resolution to suspend all oil contracts until laws and institutions are in place to fight corruption.

Uganda’s oil reserves appear to be significant, and there are indications that the region could be another oil bonanza. But at the moment, fears of corruption are dampening the mood. According to a recent article from the Associated Press Uganda stands to earn some $2 billion per year for the next 35 years, but:

“All signs are that Uganda will be the latest nation to fall victim to the ‘oil curse’ — cheated of its financial benefits by a corrupt government and left with extensive environmental damage,” said Uganda’s Association of Professional Environmentalists.

Critics are already complaining that more than $300,000 paid in signature bonuses on oil contracts already have gone missing. Legislators have accused the prime minister and two Cabinet ministers of taking millions of dollars in bribes from Tullow — charges Tullow denies.

The controversy surrounding Tullow’s operations in Uganda doesn’t fit with the image of Tullow Oil in Ghana.

In Ghana, Tullow Oil has a strong public presence, speaks to the press and generally presents itself as a responsible corporate partner.

Watching the Tullow controversy unfold in Uganda over the past year or so, I’ve wondered which Tullow is the “real” Tullow.  Are there “good” oil companies and “bad” oil companies? Or do company profiles and practices vary depending where they are operating?

I often find myself in discussions about the relative merits (or sins) of different oil companies. Which company is the worst? BP? Shell? Chevron? A few Ghanaians have told me that Shell must not come to Ghana. Look at what the company has done to Nigeria, they say. Americans often point the finger at BP, citing the Deepwater Horizon and previous disasters. A friend who used to work at Chevron said that company had higher standards than others. Then one day she told me she had quit because she could no longer say that and believe it. Just the other day, a student asked me about ExxonMobil in Chad and Cameroon: how could that company act with such disregard for the local communities?

Perhaps there are measurable differences between companies; maybe certain oil companies really do behave more recklessly than others. For years, ExxonMobil was singled out as the worst oil company, but after the Deepwater Horizon disaster Occupational Safety and Health Administration (OSHA) data surfaced that indicated BP’s safety record was worse than ExxonMobil’s. Of course, that was just in the U.S. and only concerned safety. Shell has allegedly infiltrated every ministry of the Nigerian government and is implicated in the deaths of Ken Saro-Wiwa and other activists.

But it does seems that a company is only as good or bad as the regulation that covers its activities. In the case of BP’s operations in Texas and in the Gulf of Mexico, for example, lack of oversight was a major problem. Whether we’re looking at safety, environmental protection or the (mis)use of revenues, regulation (laws on the books and implemented) and independent oversight are critical.

And getting back to Tullow, here’s some more information from the February 17th Associated Press article:

The deal with Anglo-Irish company Tullow Oil lacks transparency, contend critics who do not want to see Uganda go the way of other African countries like Nigeria, Equatorial Guinea and Angola, where a small elite became fabulously wealthy off petroleum while most citizens remained deeply impoverished

Dickens Kamugisha, CEO of the Uganda-based Africa Institute for Energy Governance, complained that the agreements between the government and the oil companies are secret, and so are environmental and feasibility studies.

Uganda’s High Court is to hear a petition March 5, filed by Kampala lawyer Hamada Mulumba as a concerned citizen in December, asking the court to temporarily halt the government from signing any oil deals. But earlier this month, after more than a year of acrimonious negotiations, the government signed two licenses with London-based Tullow Oil.

The agreements, worth $2.9 billion, allow Tullow to sell two-thirds of its Uganda interests to China’s CNOOC Ltd. and France’s Total. Tullow agreed the oil would be refined in Uganda and not exported as crude.

Ugandan legislators resolved three months ago that all oil contracts should be suspended until Parliament puts in place laws and institutions to ensure transparency in the industry. Still, the deal with Tullow Oil was inked.

Government spokesman Fred Opolot said the government “is not bound by parliamentary resolutions, which are advisory.”

Tullow Ghana and Tullow Uganda: the different stories may say much more about Ghana and Uganda than they do about Tullow.

For some background on Uganda’s oil, including information on the environmental and social risks, The World Resources Institute has published a detailed working paper, Avoiding the Resource Curse: Spotlight on oil in Uganda.

 

This entry was posted on Sunday, February 26th, 2012 at 4:21 am.