‘No legal obstacle’ to publication of contractConocoPhillips deal
The production sharing contract signed in June by the Bangladesh government and US-based oil company ConocoPhillips, which gave the company right to explore two deep-sea offshore blocks in the Bay of Bengal, does not include any legal bar to its publication.
Peter Rosenblum, a professor of human rights law at Columbia Law School and co-author of a 2009 report on confidentiality clauses in contracts involving the extractive industries, which was written for the respected US-based Revenue Watch Institute, told New Age that he did not ‘see anything in the clauses in the model PSC 2008 relevant to the confidentiality of the contract’.
Article 26.9 of the model PSC states that certain data and information are ‘strictly confidential and shall not be divulged during the term of this Contract by either Party without the prior written consent of the other Party...’
The ‘data and information’ referred to in this Article is limited to ‘any and all data (including, but not limited to, geological and geophysical reports, logs and well surveys), reports, information, interpretation of such data and all other information or work product pertaining to the Contract Area…’
Rosenblum told New Age that the confidentiality clause in the model PSC was ‘very limited in its scope’ and that ‘given the history of such clauses, it is fair to say that it goes out of its way not to include the text of the agreement within the definition of the material to be kept confidential.’
A senior Petrobangla official, who did not have the authority to speak openly on behalf of his organisation, told New Age on 14 July that he accepted this interpretation of the contract but argued that, even then, commercial confidentiality and national security interests required that the fully signed contract should not be made public.
He also claimed that there was, in fact, very little information that had not been made public.
‘The whole contract has been made public except for two matters. The first is the details of production sharing between the two parties, and the second is the exact coordinates of the exploration area,’ he said.
The details of production sharing relate to the exact percentages of gas that Bangladesh and the company will respectively receive after the costs of exploration and production have been spent.
The official argued that it was ‘not in the Bangladesh
government’s commercial interests’ to disclose the exact production sharing details as it would prevent Bangladesh from getting the best deal in future tenders, and mentioned that the published bidding document did contain minimum percentages of gas that Bangladesh would receive for a range of different volumes of gas extracted.
He also said that disclosing the exploration coordinates would give away important information to other countries with whom Bangladesh is in dispute with over territory in the Bay of Bengal.
The chairman of Petrobangla, Md Hussain Monsur, did not respond directly to a question about whether the contract itself prohibited its publication, but told New Age on 17 July that it would be wrong to publish the contract as ‘sometimes a company gives us some concessions, which it does not give to other governments, and sometimes we give concessions to some company, which we may not be willing to give to another one. These are trade secrets. Democracy should not mean that everything should be published.’
In a letter on 19 July Selina Akhtar, an energy division official, rejected a request made by New Age under the Right to Information Act 2009 for a copy of this and other signed PSCs. She stated that the publication of ‘biddable items may harm further bidding rounds and also interrupt the implementation of the [current] deal’.
Both the International Monetary Fund and the World Bank told New Age in the middle of July that they would not urge either of the parties to publish the contract even though they acknowledge that they themselves recommend that governments and companies should publish contracts of this kind.
According to the IMF in its 2007 Guide on Resource Revenue Transparency, ‘Good practice for transparency…would require publication of all signed contracts.’
The Guide goes on to argue that the conventional arguments used by governments and companies for not releasing PSC contracts are not sustainable.
‘An often expressed concern with regard to open tendering processes is that both government and companies may lose their competitive advantage by public disclosure of winning contracts,’ the Guide states. ‘The reason usually advanced by governments (and to some extent by companies) is that disclosure would erode their bargaining power for future contracts. In practice, however, the contract terms are likely to be widely known within the industry soon after signing. Little by way of strategic advantage thus seems to be lost through publication of contracts.’
The Guide also argues that governments have much to gain from the contract’s publication.
‘Indeed, it could be argued,’ the Guide concludes, ‘that the obligation to publish contracts should in fact strengthen the hands of the government in negotiations, since the obligation to disclose the outcome to the legislature and the general public increases pressure on the government to negotiate a good deal.’
Keiko Utsunomiya, a spokesperson for the IMF in Washington, told New Age on 13 July that although the ‘IMF seeks to promote transparency in government interactions with the private sector…we would refrain, as a matter of policy, from making any specific recommendations until we have an opportunity to discuss with the Bangladesh authorities and understand their potential macro-economic significance.’
When asked whether the IMF intended to raise the issue with the Bangladesh authorities, she said that there was no immediate intention to do so. The IMF has no financial stake in the agreement.
The World Bank’s office in Dhaka also told New Age on 14 July that it has no plans to seek the publication of the PSC though its private sector arm, the International Finance Corporation, does have a draft policy that states that it ‘will encourage governments and corporations to make extractive industry contracts public’.
In a statement the World Bank, which also has no financial involvement in the contract, said that it was ‘in favour of transparency along the extractive industries value chain, including transparent procedures around licensing and contracting’.
The contract signed by ConocoPhilips and the Bangladesh government was based on the model Production Sharing Contract 2008, which has been made fully public.
However, campaigners seeking the publication of the signed agreement point to
three subject areas which were open to bidding when the Bangladesh government sought offers from international oil companies in exchange for the rights to explore various offshore blocks.
The three areas are the level of exploratory activities that ConocoPhillips committed itself to undertaking, the level of bank guarantees that the company will provide, and the exact proportion of gas that Bangladesh will receive free of cost, depending on the volume of the gas extracted.
The senior official of the Petrobangla told New Age that after the contract was signed, journalists were provided a briefing sheet which contained information on two of these issues, ConocoPhillip’s work commitments and the level of bank guarantees.
A copy, given to this reporter, states that in addition to the mandatory work programme set out in the model contract, ConocoPhillips has said that in the first five years it will carry out ‘973 line km of seismic survey’ and drilling of ‘one optional well’, and give a bank guarantee of $52 million.
The senior Petrobangla official also said that two other substantive changes had been made in the model PSC — one which states that any arbitration of a dispute between the parties will be conducted outside Bangladesh, and another which removed the word ‘inefficiency’ from the criteria of conduct that could compel ConocoPhillips to provide compensation to Bangladesh.
He argued that omission of the word ‘inefficiency’ should not be considered contentious since it duplicates other efficiency requirements in the contract.
He said that Petrobangla has made these matters public also.
However, campaigners do not trust the Petrobangla’s statements about the contract and argue that they will only be satisfied if the whole contract is published.
‘The publication of the contract will allow the public to see the exact terms that the Bangladesh government has accepted from ConocoPhillips,’ Professor Anu Muhammed, a vocal leader of the National Committee on Protection of Oil, Gas and Mineral Resources, Power and Ports, told New Age. ‘The people of the country, the owners of the mineral resources, have the absolute right to know what their government is doing with their immediate and long-term future’
Anu Muhammed, whose organisation brings together those who claim that the terms of the 2008 Model PSC are against the interests of Bangladesh, had earlier rejected the offer of taking part in discussions with the government unless it first published a copy of the contract.
Peter Rosenblum told New Age, ‘The global trend towards disclosure of major mining and oil contracts is rapidly accelerating. There just aren’t many legitimate arguments for contract secrecy. In the recent months, oil contracts that were secret were disclosed in Ghana and Uganda.’