Contract transparency missing as IFC expands oil investments in Africa
News||22 September 2009|update 67|
By Josh Klemm, Bank Information Center
As the World Bank's private lending arm, the International Finance Corporation (IFC), expands its role in the African oil and gas sector, civil society groups are insisting that it adopt a requirement for full contract transparency in all of the extractive industries projects that it finances.
In August, the IFC announced plans to increase its funding for oil projects in Sub-Saharan Africa, fast becoming an important global source of oil. Africa currently comprises 20 per cent of IFC's $2 billion global oil and gas portfolio and growth is expected with the IFC exploring oil investments in Uganda, Tanzania and elsewhere.
Earlier this year, the IFC approved $215 million in loans to Kosmos Energy and Tullow Oil to exploit newfound oil and gas reserves in Ghana's Jubilee field over objections from civil society (see Updates 65, 64). In a letter to the IFC's executive directors prior to the project's approval, civil society groups stressed transparency as central to avoiding the corruptive effects of oil booms seen elsewhere on the continent, such as the disastrous IFC-backed Chad-Cameroon pipeline project (see Update 60). The IFC declined to disclose the contract when it approved the Jubilee project, stating that it did not meet the criteria for a 'significant' project.
IFC policy requires that "relevant terms of key agreements that are of public concern" be publicly disclosed in significant extractives projects. To date, no IFC-financed extractives project has qualified as significant. The IFC considers an extractives project significant only when it is "expected to account for 10 per cent or more of government revenues." Although many estimates place revenues from the Jubilee field in excess of 10 per cent during peak production, the IFC maintains it would instead be between seven and nine per cent, serving to highlight the arbitrary nature of the threshold.
Civil society groups have long pressed the IFC to adopt a contract disclosure requirement for all of its extractive projects to ensure good governance. According to Lindlyn Tamufor from Third World Network-Africa, "not only do contracts determine government revenues, they can also have important implications for communities, the environment, and human rights." Stabilisation clauses in contracts, which exempt investors from compliance with changes to domestic law are prevalent in extractives contracts. The UN and civil society groups have criticised these clauses for undermining the ability of countries to apply international human rights standards (see Update 60).
Meanwhile the IFC has announced plans for closer cooperation with China to finance oil and gas projects in Africa, raising worries about its future activities in a continent widely regarded as being a showcase for the "resource curse".
Questions are again being raised over scarce public resources being used for fossil fuel projects backed by wealthy multinationals, as a study by the Guardian newspaper found that three of the top fifteen most highly paid executives in the UK are employed by Tullow Oil.
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Published: 22 September 2009 , last edited: 22 September 2009
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