Monrovia – By requiring companies to publish the names of their owners prior to making a bid for petroleum play in Liberia, the post-war nation on the verge of a major drilling expedition by the US oil giant, Exxon Mobil is poised to separate itself from many budding oil industries and mark a historical-turning point that could put it in a comfortable position for the future.
Report by Rodney D. Sieh, [email protected]
The London-based watchdog group, Global Witness whose reports have been highly critical of the government in the past, was the first to single out the passage of the country’s new Petroleum Law, which it noted marks a significant step toward the transparent management of the country’s oil sector.
However, GW was quick to caution that new regulations are also necessary to ensure that it is effective.
But Sirleaf told FrontPageAfrica via phone Wednesday that her administration will follow through:
“I am pleased that Liberia is leading the way through a Petroleum Law that meets the highest international standard and which will ensure that the resources from the sector will be for the benefit of the Liberian people.
This administration will enact the necessary measures to ensure full implementation of the law.”
The new law requires competitive bidding for all petroleum contracts, and for all oil companies to declare their true owners.
Global Witness commented: “Both of these changes could help fight the corruption that has long plagued the sector by assuring Liberians that only the most qualified companies get contracts and licenses are not awarded through backroom deals to government officials.
The law could also help Liberia meet its international commitments under the Extractive Industries Transparency Initiative (EITI), a global standard to promote the open and accountable management of countries’ oil, gas, and mineral reserves.”
The passage of the law comes on the heels of several high-profile international reports for the post-war government.
(Whereas in 2007, the re-negotiation of the concession agreement with the Firestone Plantation Company and Arcelor Mittal was undertaken to attain better benefits for the country and thus) in 2013, a government-backed audit of lucrative resource deals in Liberia found that (Several of the concessions had not been fully compliant with the law regarding the processes and procedures).
In the damning report commissioned by the Liberian government, international auditors found that only two out of 68 (Forestry) resource contracts were conducted properly (with regards to the procedures and processes). Concessions granted in agriculture, forestry, mining and oil – including a lucrative deal with oil company Chevron – were either wholly or partially flawed.
Then came the bombshell report in May this year by Global Witness uncovering more than US$950,000 in bribes and other suspicious payments by UK mining firm Sable Mining and its Liberian lawyer, Varney Sherman. Responding to Global Witness’ findings, the government has pledged to investigate and hold those culpable to account.
The report, The Deceivers (1), showed how in 2010 Sable hired Cllr. Varney Sherman, head of the ruling Unity Party and one of the best-connected lawyers in Liberia, in an effort to secure one of Liberia’s last large mining assets, the Wologizi iron ore concession in northern Liberia.
Sherman told Sable that in order to obtain the contract the company must first get Liberia’s concessions law changed by bribing senior officials, according to a source familiar with the discussions. The account is backed up by leaked emails and company documents seen by Global Witness.
According to the documents, Sherman then began distributing Sable’s money to some of Liberia’s most important government officials.
“Sable and Sherman paid bribes in order to change Liberia’s law and get their hands on one of its most prized assets, the Wologizi concession,” said Jonathan Gant, Senior Campaigner with Global Witness.
“The government must act fast and investigate Sable, Sherman, and the officials they paid.”
But as Jonathan Gant, a senior campaigner on Liberia for Global Witness pointed out in the group’s recent welcome of Liberia’s new oil law passage, the action breaks a trend that could benefit Liberia in the long haul.
“This law is a great start,” said Gant. “Liberia has had a history of difficulty in natural resource (management). The Petroleum Law, if implemented and backed up by equally progressive regulations, will help prevent corrupt deals from happening.”
The new Petroleum Law comes at a key time in the development of Liberia’s oil sector.
The country is not yet producing oil but has awarded ten offshore licenses, some of which are held by US oil giants Chevron and Exxon. But with badly outdated laws and little government capacity, the sector has been vulnerable to the sort of corrupt abuse that has befallen neighbors like Nigeria.
According to GW, the new law should help fight oil corruption because it will now require all companies that want to bid on oil blocks to declare to the government who owns them – their beneficial owners.
In previous reports, Global Witness has shown how anonymously-owned companies have been used to launder public money and dodge taxes.
Now, all oil agreements will have to undergo a competitive bidding process, and information on how winners are chosen must be made public.
But under the new law, the state-owned oil company NOCAL will no longer regulate private oil companies – regulatory power will instead be handed to the new Petroleum Regulatory Authority (PRA). Under Liberia’s old law NOCAL was tasked with regulating its partner companies, which posed a clear conflict of interest.
Nevertheless, GW warns that additional safeguards are needed, to ensure that the Petroleum Law is effective.
The law does not make clear what is meant by a beneficial owner, for instance, leaving those wishing to hide their assets too much room for interpretation. It is also not assured that companies’ ownership information will be made public, a critical step to ensuring that oil deals are free from corruption.
While heaping praise on the government, GW cautions that past experiences not come back to haunt much-heralded milestone.
“It must also be noted that past efforts by the Liberian government to have companies declare their beneficial owners have not been successful.”
GW warned: “Liberia has pledged to follow standards established by EITI, which includes publishing extractive companies’ beneficial owners.
However, when the Liberian government attempted in 2015 to get companies’ ownership information.
Global Witness says it is also concerned at the large amount of oil revenue that the PRA will now have at its disposal.
“Until oil production starts, most of the money Liberia receives from companies comes in the form of large bonuses that companies pay to the government upon signing new contracts.
The Petroleum Law gives control of these bonuses not to the Ministry of Finance, where they could be spent on roads or education, but to the PRA for its internal operations. Past experience in countries such as Angola has shown that, when oil revenues are controlled by oil agencies, they can be stolen.”
Gant though remains guarded about the prospects: “With the law in place, the government must now turn its attention to drafting regulations that close possible loopholes,” said Jonathan Gant.
“These regulations must make sure that all natural resource companies declare the people who are ultimately in control, and make sure that signature bonuses are not lost from state coffers. And, unlike in years past, these rules must be enforced.”
The passage comes as Liberia and its international partners are hopeful of a successful drilling by the U.S. oil giant Exxon Mobil which has commenced drilling operations in its license offshore Liberia.
The Liberia Block 13 (LB-13), comprising more than 625,000 acres (2,500 square kilometers) is sitting offshore Liberia in water depths ranging from 250 to 10,000 feet (75 to 3,000 meters).
Exxon Mobil acquired an 80 percent stake in LB-13 back in 2013 from Canadian Overseas Petroleum, with drilling originally slated for 2014. Exxon later increased interest to 83 percent.
However, Exxon Mobil was forced to postpone its drilling plans due to the outbreak of Ebola, which led to deaths of thousands since the first cases discovered back in 2014.
