Tullow Oil’s foul play in Ghana

28 Jun 2012 admin


Sunderland FC’s controversial sponsorship deal with a Tullow Oil front group was featured in today’s Independent:

There are growing concerns surrounding the suitability of Sunderland's new sponsor, Invest in Africa, amid claims from the oil watchdog Platform that the initiative's founding partner, Tullow Oil, is responsible for damaging business practices on the continent.

Tullow Oil have a reputation of trying to push oil contracts in countries like Uganda and the Democratic Republic of Congo with terms that are not at all favourable to the local communities. In Ghana, where Tullow have faced comparatively less criticism, the company has fallen short of its stated commitments to corporate responsibility and local development in Africa.

Clear as mud

Tullow's website gives the impression that the company is big on transparency. Yet for five crucial years, Tullow refused to publish the contracts they signed with the Ghanaian government to develop the Jubilee oil field. The contracts were effectively signed in secret without meaningful public or political debate. As a result they included "stabilization clauses" which lock-in weak social and environmental regulations at the time the contract was made. If Ghana passes new laws that set higher standards, it will have to compensate Tullow for the cost of compliance. The words used in Article 26 of the Petroleum Agreement require Ghana to “restore the relative economic position” of the company. Unfair as this arrangement is, Ghana may struggle to extricate itself from these binding contractual terms.

Insufficient time and resources were given to creating effective laws and public bodies in Ghana to regulate the oil sector. Thanks to Tullow and its partners eagerness to get the oil pumping, Ghana is playing catch up and faces an uphill struggle against the resource curse.

Environmental impacts

Gas flaring is ongoing at Ghana’s Jubilee oil field. This is the practice of burning off the gas that comes mixed with oil reserves. Flaring produces a cocktail of toxic chemicals such as benzene, that are harmful to the local environment and to human health.

Tullow claims it is flaring gas in Ghana for “health and safety” reasons. Yet this makes a mockery of the Ghanaian government’s “zero flaring” policy and sets a a low bar for corporate compliance with environmental regulations. In the rush to exploit Ghana’s oil, Tullow and its partners failed to create the infrastructure necessary to utlilise the gas. The result is not only harmful to the environment but it is also wasteful in a country struggling to produce enough electricity for its citizens. Ghana presently depends on gas imports from nearby Nigeria.

The short history of the Jubilee field has been blotted by at least three known oil spills. Alongside pollution are the disturbing reports of seven dead whales washing ashore in 2010 alone. As BP's Gulf of Mexico disaster illustrates, deepwater oil extraction poses serious risks to the environment and marine life which coastal communities in Ghana depend on for their livelihood. Despite these concerns, Ghana has only recently drafted a Marine Pollution Bill to tackle future spills. The capacity of the Environmental Protection Agency to enforce the law remains uncertain and the oil companies have been accused of ignoring the legal requirement to conduct Fisheries Impact Assessments.

Community development?

Expectations run high in the impoverished coastal communities in the Western region of Ghana. So far, communities have seen few benefits from the oil wealth being extracted. Local journalists report that:

“The residents of this area … cannot yet point to any project that has made a change in their lives ever since the jubilee partners became their neighbors.”

A coalition of Ghanaian NGOs who surveyed local communities added:

The few who got some TV sets, chairs, bore holes, etc believe that the oil companies could do more.

In place of improved development, the fishing communities affected by the oil rigs have had their traditional livelihoods threatened. A 500 meter exclusion zone around the oil rigs has been enforced by the Ghanaian navy, who have intercepted fishing boats and physically abused locals.

In an attempt to soften the impact, Tullow has initiated a variety of CSR projects addressing water, education and River Blindness. However, local NGOs are concerned that Ghana will end up footing the bill for Tullow’s “community development” projects. Tullow’s head of media relations George Cazenove denied this. He told The Independent that the “costs for CSR work are not recoverable”. Yet this conflicts with statements from his Ghanaian counterpart. Gayheart Mensah, the Public relations officer of Tullow Ghana, confirmed earlier this year that: “CSR is an operational cost.”

The contract for the Tullow operated part of the Jubilee oil field allows the company to recover from Ghana “other costs… for the necessary and proper conduct of Petroleum Operations.” This could arguably include the costs of CSR projects. It further specifies that “charitable donations” may be recoverable “where prior approval has been obtained from GNPC [the Ghana National Petroleum Corporation]” (see Annex 2, Section 3, 3.16 and 3.17).

Given the concern about Tullow's operations in Ghana and across the continent, it is not very credible for Tullow’s front organisation, Invest In Africa to be spouting rhetoric about bringing development and wealth to the continent when Tullow Oil seems to be trying to exploit resources in a way that maximises the economic benefit to itself at the expense of the countries its operating in.

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