Freetown, Sierra Leone - There is a new oil rush off the coast of West Africa. But there are fears that the sector is not sufficiently regulated, and watchdog groups are raising concerns about transparency and governance in the region.
Anticipation is building in Sierra Leone after African Petroleum, an oil and gas exploration company focused on offshore West Africa, said they would begin drilling in the Sierra Leone-Liberia Basin next year after oil was discovered here in 2009. Civil society groups in Sierra Leone say they are just catching up with the oil discovery. "It's very new - we're still learning," says Mohamed Toray of the National Movement for Justice and Development.
He says the country’s Petroleum Act, which was guided by agreements with oil companies, was rushed through as an emergency bill by the president's office in July, and few people were consulted.
"Government agreements with oil companies guided the wording of the law. But, the law should have guided agreements with oil companies," he says.
He also says Sierra Leone has a lot to learn from Ghana’s government, which engaged with civil society and the public when oil was found off its shores in 2007.
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He says lessons can also be learned from Nigeria's troubled history with oil. A recent report by the European Union Parliament says varying figures of 93 to 716 barrels a day were lost in Nigeria due to conflict, based on best and worst case scenarios.
Now Liberia is garnering attention – with expectations high that oil will be found soon. Major U.S. oil giants Chevron and Anadarko Petroleum Corp (one of the world's largest independent oil and gas exploration and production companies) are all searching hard in Liberia’s waters. The relatively unknown African Petroleum is also conducting explorations.
According to the U.S. Geological Survey, the West African Coastal Province – which includes Liberia, Sierra Leone and Guinea – has an estimated 3,200 million barrels of oil and 23,629 billion cubic feet of gas.
Translated into hard cash, that is hundreds of billions of dollars. "But, nobody knows for sure what it’s worth," says Natalie Ashworth from Global Witness, the campaigning organisation that uncovered links to how the wars in Sierra Leone and Liberia were fuelled by natural resources.
"Anadarko, the company that found reserves in Sierra Leone's waters, is apparently keeping its data close to its chest," she says.
Oil discoveries should be a boon to this region - boosting gains made from the war recovery efforts with millions of donor dollars, and increasing foreign investor confidence.
Liberia's current GDP per capita is a minute 247 dollars, and Sierra Leone's is 325 dollars – so any oil find would make a serious impact in two of the poorest countries in the world. Both Liberia and Sierra Leone rank amongst the worst places in the world for mothers to give birth, for example, despite both burgeoning with natural resources.
The implication is that a lack of transparency means a loss of potential revenue, and possibly depriving these economies of desperately needed social spending.
Liberia’s oil could turn out to be a blessing for some, and a curse for most, unless the government commits to an open reform process, says Global Witness. Oil exploration began in August off the coast of the West African country. However, the international organisation says that unless the country cleans up its oil sector, they will not be ready for oil.
In a September report by Global Witness, the watchdog organisation says it has already uncovered discrepancies, bad practice and even corruption in Liberia.
"Our investigations have shown that, even before a discovery is made, there are deep-seated problems in Liberia’s oil sector: government officials and at least one company have paid bribes, contracts have been awarded illegally, and companies with little experience in the oil sector have received concessions," says Ashworth.
The group claims that a government agency paid bribes to the legislature so that oil contracts would be ratified. It also found the sector was not independently regulated.
Global Witness says that reforms in Liberia, like passing the groundbreaking Extractive Industries Transparency Initiative law that publishes extractive industry contracts and revenue data to improve resource governance, have not gone far enough in practice.
Global Witness goes as far as to say that Liberia is "not ready for oil" with its current governance and lack of transparency and needs wider reforms in its resource sector before people can actually benefit from any new finds.
Indeed, the history of oil in Africa has so far been a tumultuous one. A recent EU report found that the negative impacts of the oil industry in sub-Saharan Africa were a major concern, for the health and livelihoods of local communities.
It also stressed the need for better accountability, transparency and governance, and came hot on the heels of the United Nations findings highlighting the impact of oil spills in the Niger Delta.
The Niger Delta is said to be one of the most polluted sites in the world with oil spills over the last 50 years, having a devastating impact on human and wild life. A clean up is estimated to take 30 years at a cost of around one billion dollars, according to the U.N.
Meanwhile, Ian Gary of Oxfam International says the oil transparency and governance situation in Ghana at least is stronger than in the case of its neighbours, citing the fact that petroleum agreements are posted on the Ministry of Energy’s website.
"There were months of debate with heavy input from the public and civil society to develop the Petroleum Revenue Management Act," he says. Ghana also recently inaugurated the Public Interest and Accountability Committee, a civil society watchdog required by the new law.
Despite this progress, Oxfam International says constant vigilance from civil society will be needed to ensure laws are upheld in practice.