Home' Trinidad and Tobago Guardian : April 17th 2014 Contents There is a move towards contract process trans-
parency in which the Extractive Industries
Transparency Initiative (EITI) is at the forefront.
The EITI is a worldwide initiative which seeks
to encourage transparency and accountability
in the oil, gas and mining industries, by dis-
closing to citizens the payments made by these companies to
the respective governments, reconciled with the money received
by the Government.
The EITI, therefore, is an explicit attack on corruption; it
improves governance in resource rich countries and increases
foreign investment. With the release of our first T&T EITI
report in 2013, we are well on our way to becoming EITI com-
pliant. Since then there has been increased national interest
and recognition of the importance of contract transparency
in the energy sector.
As such, at our 2014 T&T Energy Conference, Dr Susan
Maples, an independent oil and gas consultant, provided greater
insight into contract transparency to a full room of govern-
ment ministries, private companies, labour unions, multina-
tionals, and civil society groups.
For Maples, contract transparency in the chain of the EITI
refers to transparency of production sharing contracts (PSC);
that initial contract between the government and the company
that gives the exclusive right to explore. She mentioned that
in many countries, which include T&T, a PSC has to be sub-
mitted to the Parliament to be passed, before it becomes an
official government document.
However, this is not the case for the other constellation of
contracts, such as oil sales contracts, lifting agreements and
There is less movement towards making the latter contracts
transparent. She argued many may think that investors will
recoil from investing if there are moves to enforce transparency
clauses in higher laws, and constitutions and legislative frame-
works. She gave an example of Afghanistan and a Chinese
company (CNPC), in which the contract had to be made avail-
able to the public in the hydrocarbon register. Liberia has been
doing the same for years and Mozambique is also going in
"Some people say that the Chinese will never sign on to
this. My evidence to the jury is that it is not true," she said.
Maples went on to argue that even if there are government
policies around transparency, foreign investors still invest as
it is the norm in many jurisdictions.
Transparency and good governance
Transparency is vital to the success of countries and how
they govern their resources. Maples explained that research
shows a strong correlation between transparency and good
governance. This finding may be of particular importance to
resource-rich countries which are typically susceptible to a
bout of the resource curse. Without getting too technical,
countries afflicted with this curse tend to engage in corrupt
practices and become profligate in their spending. To further
make her point, she explained that in the 1970s, South Korea
had zero resources, while Liberia possessed iron ore and rubber,
among other resources.
"No one could have predicted that Liberia would slide back-
wards with respect to this economic development trajectory,
while South Korea would experience a boom," she remarked.
The oil and gas consultant went on to explain that in her
doctoral research of oil and gas contracts all over the world,
contracts typically made sweeping statements (clauses) as it
relates to the confidentiality of what they contain. She cautioned
those in attendance about legitimate instances in which par-
ticular information may not be disclosed, such as technical/geo-
logical data or corporate innovations or trade secrets.
Why should you care?
Granted, having access to information in oil and gas contracts
and to receipts and payments to the Government is great, but
what can you do with that information? Many things can be
done. Firstly, you can ask valuable questions:
"Are we getting the right amount of dollars for our resources?"
"Are there arrangements to receive other benefits such as
stipulations for local content and state participation?"
"How does this revenue the Government receives translate
to their expenditure on public goods?"
With this information, citizens and community-based organ-
isations keep the government and multinational companies
in check in the event of any impropriety.
As part of the EITI Steering Committee, the Energy Chamber
continues to promote transparency, accountability and good
governance in the TT energy sector. We also laud the efforts
of the EITI secretariat and the rest of the steering committee
for making significant strides to having T&T become EITI
For more information on this article, please contact
Nazera Abdul-Haqq at firstname.lastname@example.org.
To view the summary of the TTEITI first report which
will provide a layman's understanding of the sector, please
BG16 | COMMENTARY
BUSINESS GUARDIAN www.guardian.co.tt APRIL 2014 • WEEK THREE
Understanding oil and gas contracts
Houston and the rest of the US Gulf Coast
have more oil than the region can handle.
Stockpiles in the region centered on Houston
and stretching to New Mexico in the west
from Alabama in the east rose to 202 million
barrels in the week ended April 4, the most
on record, Energy Information Administration
data released today show.
Storage tanks are filling as new pipelines
carry light, sweet oil found in shale formations
to the coast and US. law keeps companies
from moving it out. Most crude exports are
banned and the 13 ships that can legally move
oil between US ports are booked solid. The
federal Jones Act restricts domestic seaborne
trade to vessels owned, flagged and built in
the US and crewed by citizens.
"You can t get all that light, sweet crude
out, it s all kind of piling up," said Jeff McGee,
the founder of Makai Marine Advisors LLC
in Dallas, who previously led research at two
shipbrokers and worked as a refinery planner.
"You couldn t find a spot Jones Act ship to
save your life right now."
The glut will make prices of benchmark
West Texas Intermediate oil US$13 a barrel
cheaper than Brent, the international bench-
mark, later this year from about US$5 now,
according to Bank of America Corp. forecasts.
The EIA forecasts the average gap for 2014
will be about US$9.
Companies including TransCanada Corp
and Enterprise Products Partners LP built and
reversed pipelines that helped a carry a record
amount of oil to the Gulf Coast from the Mid-
west last year. Total US production reached
8.23 million barrels a day last week, the highest
level since May 1988.
Thirteen tankers can haul crude domestically
out of a global fleet of about 2,400, according
to the US Department of Transportation Mar-
itime Administration. The Jones Act, a 94-
year-old law, requires all domestic seaborne
trade to be shipped on vessels crewed by cit-
izens and owned, flagged and built in the US.
Meanwhile, a 1975 law bans most overseas
US crude shipments. While supplies to Canada,
one of the exceptions allowed, have risen to
a record, the US exports three per cent of the
oil it produces, Energy Department data show.
Neither law will change soon. Mariners
unions and domestic shipping companies say
the Jones Act is critical to national security.
Lawmakers are discussing ways to extend
rather than curtail it, such as by requiring liq-
uefied natural gas exports to go on US ships.
Even as Senator Lisa Murkowski of Alaska,
the senior Republican on the Energy and Nat-
ural Resources Committee, added her support
to Exxon Mobil Corp s call to lift restrictions
on crude exports, other lawmakers in Congress
say they re concerned shipments would
increase gasoline prices at home.
"The ban on exporting US crude is mainly
responsible for the pileup of crude stocks on
the Gulf Coast," said Harry Tchilinguirian,
head of commodity markets at BNP Paribas,
France s largest bank. "The Jones Act is an
additional hurdle in trying to move that surplus
crude on the Gulf Coast to other areas of the
The glut may start to shrink in the second
quarter as refineries ramp up to meet summer
gasoline demand. Plants on the Gulf Coast
handled a record 7.92 million barrels a day of
crude last year, equal to almost 80 percent of
Chinese consumption in 2012, according to
data compiled by the IEA and Bloomberg.
Refinery runs in the region rose by 167,000
barrels a day to 8.22 million last week, EIA
Swelling inventories may also be curbed by
falling crude imports, which last year averaged
the lowest since 1996. US refineries also
exported a record 3.1 million barrels a day of
gasoline, diesel and other petroleum products
last year, EIA data show. The US allows product
The American Petroleum Institute, which
represents the US oil and gas industry in Wash-
ington, is developing legal challenges to the
crude export restrictions. Overturning the 1975
law would allow the US to ship 1.5 million
barrels a day and become one of the ten largest
crude exporters, according to JBC Energy, a
Vienna-based consulting firm.
Houston fills with crude oil that can't be shipped out
Transparency is vital
to the success of
countries and how they
govern their resources.
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